China's eased property rules not quick fix for developers

    China's latest measures to support its struggling real estate sector will likely take time to kick in, but show the central government's increasing support for the industry's growth amid a slowing economy, according to Standard & Poor's Ratings Services
  The credit rating agency further believes the measures will be generally credit positive for the property sector, but developers' own execution ability will help determine how well they weather the tough market conditions.
  On 30 March, the People's Bank of China (the central bank) and the Ministry of Housing and Urban-Rural Development (MOHURD) announced a reduction in the minimum down-payment for second-home buyers to 40%. Other ministries have also announced supportive measures for the industry.
  "We believe China's recently relaxed property measures could bolster buyers' expectation of a stabilizing market, which could lead to sales picking up," said S&P's credit analyst Christopher Yip. "But it remains to be seen how soon property developers can clear their inventory levels."
  S&P expects the loosened mortgage requirements to help stimulate demand from potential upgraders. This will particularly benefit developers in tier-1 cities, such as Beijing and Shanghai, where the down-payment requirement was as high as 70%. In addition, the cost of upgrading will reduce as buyers will now be exempt from a property transaction tax after two years, rather than five years previously. However, the new measures may not benefit
developers in lower-tier cities as much, given that these markets tend to have the most oversupply of properties.
  "We expect the central government to announce further measures to spur industry growth over the next 12 months. However, we also anticipate that average selling prices will drop 5% and volume growth will be stable due to the time needed to rebalance the oversupply of property over the next 12 months," Yip said.