Moody’s Investors Service says that contracted sales in first- and second-tier cities in China fell 30.1% and 12.9% respectively year-on-year during the five months between January and May 2017, due to tighter regulatory controls.

“By contrast, contracted sales in lower-tier Chinese cities grew 36.0% year-on-year during the same period, supported by spillover and investment demand,” says Chris Wong, a Moody’s Analyst. “However, the sustainability of such growth is uncertain.”

Wong was speaking on the release of the June 2017 edition of Moody’s China Property Focus newsletter.

Moody’s newsletter says that property price growth continues to remain modest in China’s four first-tier cities, registering an average month-on-month growth of 0.1% in May 2017 compared with 0.4% in April 2017, while the month-on-month price growth in second-tier cities was unchanged, averaging 0.5%.

Moody’s says that the wider implementation of home-purchase restrictions since September 2016 continues to moderate property price growth in high-tier cities.

On the other hand, for the seventh consecutive month, the average property price growth in lower-tier cities was higher than first- and second-tier cities, supported by the lower-tier cities’ strong sales growth. Month-on-month price growth in lower-tier cities was at 1.0% in May, unchanged from April.

As for inventory, such levels continued to decline over the two months between April and May 2017. In particular, the inventory levels of residential properties in lower-tier cities that Moody’s track decreased to 22 months in May, compared with 25 months in April and 28 months in March. Meanwhile, the inventory levels in first- and second-tier cities that Moody’s track dropped to about seven months in May 2017 from eight months in April 2017.

Moody’s says that lower inventory levels will reduce the risk of material property price corrections in most of these cities over the next 12 months.

On the issue of liquidity, Moody’s says that its liquidity index for Chinese property developers improved to 8.0% in May 2017 from 9.8% in April 2017. The result in May was the best since August 2011, with only four of the 50 developers showing weak liquidity at 31 May 2017.

Source : Moody’s

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