Hong Kong, September 29, 2017 -- Moody's Investors Service says that China's residential property
prices have cooled further in view of the implementation of tight controls
in major cities since September 2016 aimed at curbing price rises by dampening
investment and speculative activity.
"Price growth in tier 1 and 2 cities is likely to remain muted in
the next 6-12 months as the current tight regulatory measures are
unlikely to see any loosening," says Kaven Tsang, a
Moody's Vice President and Senior Credit Officer.
Home prices in China's four tier 1 cities declined for the first time
in 2017 by 0.3% month-on-month in August,
after two consecutive months of flat month-on-month growth
in June and July.
This level is lower than the 2%-4% average monthly
growth recorded prior to September 2016, when the government introduced
its current restrictions.
Meanwhile, major tier 2 cities recorded slower month-on-month
price rises of 0.1% in August 2017, compared with
0.4% in July 2017.
Furthermore, price growth in lower-tier cities is moderating,
but remains higher than that for tier 1 and 2 cities as a result of a
spillover in demand. Average month-on-month price
growth in lower-tier cities declined slightly to 0.4%
in August 2017 from 0.6% in July 2017.
Moody's conclusions are contained in its just-released China Property
Focus, "Price growth cools further amid tight regulation".
Moody's report points out that nine cities have implemented new
regulatory measures recently. In particular, tier 2 cities,
including Chongqing, Nanchang, Shijiazhuang, Nanning,
Changsha and Guiyang, are prohibiting newly bought properties from
being resold within a certain number of years.
On a sales-value basis, national contracted sales grew 14.2%
year-on-year for the eight months between January and August
2017; lower than the 15.9% growth seen in the seven
months between January and July 2017.
However, Moody's-rated developers have achieved higher contracted
sales levels versus reported average national sales so far in 2017,
and Moody's expects that these companies will continue to outperform
the broader industry.
The report further notes that inventory levels are still healthy and manageable,
even though they rose in the tier 1 and 2 cities in August, when
compared with July, due to slower sales in August 2017.
A total of 14 developers (26.4% of Moody's rated Chinese
property developers) had negative rating outlooks as of 27 September.
Moody's expects the number of negative outlooks to decline modestly
in the next 6-12 months as the credit profiles for certain rated
developers will improve, supported by strong sales, improving
margins and lower funding costs.
Subscribers can read the full report at:
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1092732
The report may also be found through Moody's topic page "China's Trilemma:
Growth, Reform and Stability", available at http://www.moodys.com/chinarebalancing.
This page provides a centralized source for Moody's research related to
key credit issues in China as the country's macroeconomic story continues
to unfold.
Recent Moody's publications relating to China's Trilemma include:
• China's Belt and Road Initiative: BRI report card:
Positive factors outweigh negatives for China and recipient countries
• Property — China: Most rated developers have capacity
to manage higher bond refinancing risk in 2018
• Government of China — A1 Stable: Regular update
• Securitization — China: Sector update — Q2 2017:
Issuance volumes up; auto ABS performing well
• China's plan to tighten regulation of negotiable certificates of
deposit is credit positive for banks
• Mass Transit Sector — China: Strategic importance underpins
credit profiles; Heavy capex remains
• NPL Securitization — China: Chinese NPL deals show
solid performance, but short history clouds future
• Internet companies — China: Finance operations weaken
credit quality; most companies have mitigants
• Cross-Sector — China: Reduced credit intensity
of growth key to achieving policy objectives
• Quarterly China Shadow Banking Monitor
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This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Kaven Tsang
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077