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Research Report

10/02/2020 18:01

Chinese property sales to fall in 2020 on coronavirus impact

[ET Net News Agency, 10 February 2020] Moody's Investors Service said in a new report
that national property sales could decline in 2020 from 2019 because the coronavirus
outbreak will weaken property sales in the first quarter of 2020. Expected weakening
demand in lower-tier cities will also hinder property sales in the year.
"Some property sales centers remain closed for now, while travel restrictions and
general precaution are preventing many potential buyers from moving around as usual. We
had already anticipated sales growth to be flattish this year, but this latest blow will
likely lead to a slight decline in national sales in 2020," said Celine Yang, a Moody's
Assistant Vice President and Analyst.
Yang was speaking on the release of the latest edition of Moody's monthly China Property
Focus newsletter, which tracks key trends and issues in the market.
Moody's report says national contracted sales value growth continued its slowing trend
in 2019 with 10.3% growth, down from 14.7% in 2018, mostly driven by lower growth in
average selling prices (8.7% year-on-year in 2019 from 12.2% in 2018).
Moody's-rated developers continued to outperform the market, with the 30 property
developers that it tracks -- of the 70 it rates -- recording 26.2% year-on-year sales
growth in December (three-month moving average), compared to 10.3% for the broader market.
On the funding side, rated developers issued $16.5 billion of offshore bonds in January
2020, a steep jump from the $5.8 billion monthly average for 2019.
Moody's further notes that the coronavirus outbreak will likely disrupt developers'
fundraising plans over the next few months. However, the NDRC's latest note allows
developers to apply for an extension of the expiry date of their existing quotas by six
months, increasing developers' flexibility in arranging new bond issuances.
Liquidity is also likely to weaken somewhat in Q1 on the back of the slower sales
expected due to the coronavirus outbreak, although most rated developers have adequate
buffers to absorb the impact.
Moody's expects small and financially weak developers will face higher refinancing risks
in the onshore and offshore bond markets, because of their weaker access to funding.
Investors and banks will likely also remain cautious because of the difficult operating
environment. (KL)

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