[ET Net News Agency, 27 November 2019] Moody's Investors Service's outlook for China's
property sector over the next 12 months is stable, driven by largely flat national sales
and healthy inventory levels.
"However, credit risks are mounting as sales growth slows and funding conditions remain
tight," said Cedric Lai, a Moody's Vice President and Senior Analyst.
"Weaker demand in lower-tier cities and the high base of comparison in 2019 will weigh
on sales growth in 2020," said Danny Chan, a Moody's Assistant Vice President and Analyst.
"We further expect the central government will maintain current tight measures over the
sector, with the aim to maintain stable property and land prices."
Nevertheless, local governments will have the flexibility to adjust the control measures
based on local market conditions, so long as they remain in line with the central
government's general policy direction.
Moody's conclusions are contained in its just-published 2020 outlook for the Chinese
property sector, co-authored by Lai and Chan.
Moody's also says that refinancing risk is increasing for small and financially weak
developers with high exposure to trust financing. Most rated developers, however, will
have sufficient liquidity to withstand the tight credit environment.
Meanwhile, inventory levels will rise but stay well below the peaks recorded in March
2016.
The industry will continue to consolidate. Mid- and large-size developers with strong
sales execution and financial discipline will gain market share from small and
non-competitive developers.
Developers rated by Moody's will generally outperform the broader market, because of
their stronger branding and sales execution, and better access to funding. (KL)