Moody’s: Most rated Chinese property developers outperform market despite ongoing regulatory tightening
Moody’s Investors Service says most rated Chinese property developers will continue to outperform the broader market for the rest of 2017, despite continued regulatory tightening to control property price growth.
“Cumulative contracted sales for the 29 Moody’s-rated developers that we track grew 72.2% year on year in the first four months of the year, and significantly outpaced the 16.1% national sales growth.” says Kaven Tsang, a Moody’s Vice President and Senior Credit Officer.
“Most of the rated developers will continue to outperform the broader industry through 2017, driven mainly by their increased saleable resources, strong liquidity as well as their strong execution abilities, reputable brands and good project locations,” adds Tsang.
Tsang was speaking on the May edition of Moody’s China Property Focus newsletter.
National property contracted sales — on a sales value basis — grew 16.1% year on year in the first four months of 2017, compared to 20.2% in the first quarter of the year
Moody’s report further highlights that China’s wider implementation of home-purchase restrictions since September 2016, aimed at curbing investment demand and speculation, continues to constrain property price growth in first-tier and major second-tier cities.
China’s four first-tier cities registered average month-on-month price growth of 0.4% in April 2017, compared with 0.6% in March 2017, while price growth in second-tier cities slowed to 0.5% from 0.7% over the same period.
Inventory levels of residential properties in first- and second-tier cities that Moody’s tracked also declined to about eight months in April from nine months in March. Moody’s believes the lower inventory levels reduce the risk of material property corrections in most of these cities in the next 12 months.
Moody’s liquidity index for investment-grade and high-yield Chinese property developers also improved to 9.8% in April from 11.8% in March, the best level since August 2011.
The liquidity index measures the number of rated developers that exhibit inadequate liquidity or are assigned Moody’s weakest speculative grade liquidity score of SGL-4. Only five developers reported weak liquidity as of 30 April 2017.