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Property developers' sales will slow down, while the outlook for China's property market remains stable, Moody's Investors Service said on Wednesday in Hong Kong.
Moody's expects a 10% year-on-year sales growth over the next 12 months, after the rate has been hitting 70% in early 2013. This projection is in line with the 11% average annual growth rate seen in 2012.
The ongoing urbanization and favorable mortgage financing for first-time home buyers will continue to support demand and sales volume, while new guidelines have been issued by the central government in February to further curb the home prices, said Franco Leung, a Moody's Assistant Vice President.
"I believe that since April 2011, the government's purchase restriction has been very effective," said Peter Choy, a Moody's Senior Vice President. "The February announcement is more to reinforce what has been done before and the 20% capital gains tax will have little impact on the primary market."
Developers including the state-owned China Overseas Land & Investment Limited and China's largest developer Vanke, those focused on mass market housing, will enjoy the strongest sales growth, according to Moody's report. The mass market aims at home-owner demand and is not the target of the government's policies, Leung said.
On the other hand, developers including Yanlord Land Group, Zhong An Real Estate Limited and SPG Land Limited, who have higher portion of their inventory in the luxury property would see a weaker sales growth. "They would need more time to reposition their product strategy," said Leung. "Small housing units (smaller than 144 sqm) account for about 70% of Moody's rated developers' inventories and 78% of their customers are first-time buyers and upgraders."
"Developers are not under pressure to dispose of inventories and their liquidity situation has been much improved," said Leung. "The roll out of the projects will be gradual and will not be in a rush."
