Hong Kong, April 01, 2016 -- Moody's Investors Service says that following a strong 22.5%
year-on-year rise in cumulative national contracted sales
in China (Aa3 negative) for the 12 months to February 2016, growth
in nationwide homesales will likely narrow to 0%-5%
for the rest of the year.
"We expect further policy tightening in cities with strong sales
growth, which combined with the previously announced measures will
likely constrain the growth of contracted sales and property prices in
the next 6-12 months," says Kaven Tsang, a Moody's
Vice President and Senior Credit Officer.
Moody's conclusions were contained in its recently released report
"Developers Face Credit Negative Effects from Measures to Dampen
Price Surge in Shanghai and Shenzhen". At the same time,
Moody's has also released the latest monthly edition of its "China
Property Focus" newsletter.
Shenzhen and Shanghai have reported robust price growth over the last
few months, leading regulators to implement measures including tighter
home purchase restrictions, higher minimum down-payment requirement
for second-home mortgages, increased land supply for residential
housing, and increased supervision over improper financing arrangements
for down-payments.
Moody's expects these measures will reduce property sales by reducing
the number of eligible buyers, and thus moderate the contracted
sales and property price growth in targeted cities.
"At the same time, we expect policies will be relaxed in cities
with high inventory levels and weak property prices to help them reduce
their inventories," adds Tsang.
Moody's monthly newsletter further says the strong national property
sales in the first two months of 2016 -- with cumulative contracted
sales up 49.2% year-on-year to RMB744 billion
according to China's National Bureau of Statistics -- were
the result of supportive monetary and regulatory policies implemented
since 2H 2014.
The average selling price nationwide was also up 14.4% year-on-year
over the same period. And for the seventh consecutive month,
all four first-tier cities posted double digit year-on-year
price growth. Shenzhen registered the highest price growth of around
57.8% year-on-year in February 2016,
followed by Shanghai at 25.1%.
By contrast, majority of lower tier cities tracked by National Bureau
of Statistics of China continued to register negative year-on-year
growth.
Cumulative contracted sales for the 20-rated developers that Moody's
track grew 57.2% year-on-year in the first
two months of 2016 to around RMB213 billion. Moody's expect
sales of Moody's-rated developers will continue to outperform
the broader industry for the remainder of 2016.
Moody's took 11 negative rating actions on property developers between
27 January and 24 March 2016, mainly reflecting weakened financial
metrics, weak liquidity profiles and/or the potentially weakened
capacity of their parents to provide support.
The March edition of Moody's newsletter features the following articles:
• Strong Sales Momentum to Moderate
• Price Growth in First-Tier Cities Remains Robust
• Ratings of Most Developers Unaffected by Sovereign's Negative
Outlook
• Liquidity Index Remains Stable in February 2016
• Eleven Rating Actions Since Our Last Publication
The reports are available to subscribers here:
http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_188693
http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1021734
The report may also be found through this link to Moody's topic page,
China — Reform and Rebalancing, a centralized source for Moody's
research related to key credit issues in China as the country's rebalancing
story unfolds.
Recent Moody's publications relating to China Reform and Rebalancing include:
• Automakers -- China: Sales Growth to Accelerate in 2016
with Vehicle-Tax Cut but Slow in 2017
• Property -- China: Ratings of Most Developers Are Unaffected
by Sovereign's Negative Outlook
• China Life Insurers: Negative Outlook Reflects Weaker Macroeconomic
Conditions
• Banking: China Macro Profile: Moderate
• Moody's Changes China's Outlook to Negative and Affirms
Aa3 Rating
• Government of China -- Aa3 Negative: Annual Credit Analysis
• China Credit: Conflicts Between Policy Objectives Raise Risk
That Momentum on Reform Will Slow
• Auto ABS -- China: Delinquencies Will Rise Moderately
in 2016 After Declining in Q4 2015
• Retail -- China: High Leverage Will Exacerbate Pressure
on Department Stores' Credit Quality
• Government of China -- Aa3 Negative: Update Following
Change in Outlook to Negative from Stable
These reports are available at http://www.moodys.com/chinarebalancing.
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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.
Franco Leung
Vice President - Senior 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.)
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Gary Lau
MD - Corporate Finance
Corporate Finance Group
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Moody's:China property sales momentum to moderate; Policy fine-tuning to continue