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HONG KONG May 21 Moody's on Wednesday lowered
its outlook for China's property industry to negative from
stable, reflecting expectations of slower residential property
sales growth, high inventory levels and weakening liquidity over
the next 12 months.
Most of the rated developers have good cash buffers and
manageable refinancing risk, however, the rating agency said, as
they benefit from waves of bond issues and solid demand for
their mass market properties.
"The weaker sales growth for the sector is driven mainly by
tighter onshore liquidity, increased mortgage rates, buyers'
expectation of further easing of property prices and slower GDP
growth in China," Moody's said.
After increasing at double-digit rates through most of last
year, home prices in China started cooling in late 2013, with
the annual growth in average new home prices slowing to an
11-month low in April, as a sustained campaign to clamp down on
speculative investment and easy credit gained traction.
An abrupt correction in the real estate market would pose
risks to the banking system and the already-cooling economy.
China's central bank has asked commercial banks to speed up the
granting of home loans and to set mortgage rates at reasonable
levels, sources told Reuters last week.
Moody's assistant vice president Franco Leung told a
roundtable that Moody's expects China's property sales value
will see flat to 5 percent yearly growth over the next twelve
months, compared to a 26.6 percent growth at the end of 2013.
He expects nation-wide property prices to grow at the same
rate, with a correction in the lower-tier cities weighing on the
growth of their first-tier peers.
Yet, the agency said it expects the credit quality of most
of the 52 developers that it rates to remain stable due to their
good liquidity and access to funding. Favourable operating
conditions in 2013 boosted the liquidity of many rated
developers, it said.
"Their financial matrix are stabilizing in 2014 because
they're booking their record sales from 2013," said vice
president Kaven Tsang, adding the large scale and high demand
for the mass market properties help these developers to
withstand the current market downturn.
Tsang said growth of trust financing in the first quarter
has slowed as some developers repaid the trust loans with sale
proceeds in order to lower the refinancing cost.
Referring to the recent proposed stake purchase in Greentown
China Holding Ltd by Sunac China Holdings Limited
, Leung said he expected to see more of
such consolidation as developers count on bigger scale to win
loans from banks.
The last time Moody's downgraded China property sector's
rating to negative was in April 2011, when Beijing introduced
restrictions on home purchases in order to curb the over-heating
(Reporting by Ian Chua and Clare Jim; Editing by Kim Coghill)