(The following statement was released by the rating agency)
HONG KONG, August 10 (Fitch) Fitch Ratings says that upgrade
home buyers are
likely to be the key driver for China's housing demand in the
next 12 to 18
months. This comes as the recent relaxation of home purchase
provides more opportunities for upgraders to purchase
large-sized units - a
product line that was suppressed under the restrictions.
Homebuilders with diversified product lines and operational
be able to take advantage of this likely demand growth in
products for the upgrade home buyers. This segment may become
the key driver for
contracted sales and higher margins for the developers in medium
Since the implementation of the HPRs in 2010, the mass market
segment has been
the key growth driver for China's residential property market.
focuses on unit size of below 90sqm and up to 140sqm, targetting
upgrade buyers. The segment accounted for 75% to 90% of the
homebuilders' contracted sales in 2012 and 2013.
As more homebuilders focused on the mass market segment, the
small-unit products increased and competition intensified. This
resulted in an
increase of asset turnover but a declining trend in
profitability for mass
market-orientated developers in the past two to three years.
The recent relaxation of the HPRs is likely to unleash the
demand for larger unit size products from 140sqm to 220sqm.
There was strong
growth in the first-time buyers segment for the past two years,
large numbers of these homeowners have become upgraders,
fuelling a demand for
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