Hong Kong, August 31, 2017 -- Moody's Investors Service says that it expects the slowdown in growth
in property sales in China will continue for the remainder of the year
as the regulators maintain their tight controls on the market and as national
contracted sales (on a sales value basis) grew by 15.9%
year on year for the first seven months of 2017, slightly lower
than the 17.9% recorded in the first half of 2017.
"The next 6-12 months will be challenging for developers
as tight regulatory measures --such as home purchase restrictions
and price controls -- are likely to remain in place and
will continue to pressure national sales growth," says Anthony
Lee, a Moody's analyst.
"Sales in July 2017 only grew 4.3% year on year,
the lowest monthly sales growth so far in 2017, although July and
August are traditional low months for sales," adds Lee.
Moody's conclusions are contained in its just-released China
Property Focus, "Growth slows as tight controls maintained".
However, cumulative contracted sales for the 29 Moody's-rated
developers that we track recorded 54.8% year-on-year
growth in the first seven months in 2017, significantly outpacing
the national sales rate of 15.9%.
Moody's expects its rated developers to continue recording contracted
sales growth higher than the industry average, reflecting their
better sales execution, reputable brands, and attractive land
banks.
"Land sold by local governments is increasingly subject to restrictions.
These conditions tend to favor large-scale developers with strong
financial resources, and are likely to result in further market
consolidation," says Lee.
Restrictions include price caps or requiring developers to hold a higher
proportion of a development as investment properties.
Average property price growth in lower-tier cities was more than
that recorded in higher-tier cites, supported by spillover
demand from buyers seeking residential properties away from more expensive
higher-tier cities.
But the gap is narrowing as month-on-month price growth
in lower-tier cities slowed to 0.6% in July 2017
from 1% in June 2017, because of the tighter measures implemented
in some of the more expensive lower-tier cities.
The report further notes that the inventory of residential properties
in Tier 1 cities and the 11 Tier 2 cities Moody's tracks remained
low at 10 months and seven months, respectively, in July.
Low inventory will reduce the risk of property price decreases in these
cities in the next 12 months.
Moody's did not carry out any rating actions between 27 July 2017
and 25 August 2017
Thirteen developers (25.5% of Chinese property developers
that we rate) had negative rating outlooks as of 25 August 2017.
Moody's expects the number of negative outlooks to decline slightly
in the next 6-12 months as credit profiles for some rated property
developers improve, supported by disciplined financial management,
and strong sales and revenue.
Subscribers can read the full report at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1088825
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 Plan to Tighten Regulation of Negotiable Certificates of
Deposit Is Credit Positive for Banks
• Securitization — China: Sector update -- Q2 2017:
Issuance volumes up; auto ABS performing well
• 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
• Power Sector — China: Challenging environment continues,
more opportunities in renewable energy
• Moody's changes outlook for China's banking system to stable from
negative
• Rated Non-Financial Corporates — China: Credit
Trend Monitor
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This publication does not announce a credit rating action. For
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for the most updated credit rating action information and rating history.
Anthony Lee
Analyst
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
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Kaven Tsang
VP - Senior Credit Officer
Corporate Finance Group
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Releasing Office:
Moody's Investors Service Hong Kong Ltd.
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