May 21, 2014 / 4:50 AM / in 4 years

Moody's cuts outlook for China's property industry to negative

May 21 (Reuters) - 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.

“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.

Yet, the agency said it expects the credit quality of most of the developers that it rates to remain stable due to their good liquidity and access to funding. Favorable operating conditions in 2013 boosted the liquidity of many rated developers, it said.

After increasing at double-digit rates through most of last year, home prices in China started cooling in late 2013 as a sustained campaign to clamp down on speculative investment and easy credit gained traction.

An abrupt correction would pose risks to the banking system and the 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. (Reporting by Ian Chua; Editing by Kim Coghill)

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