Moody's revises China's property outlook to stable

Moody's Investors Service has changed its outlook for China's property industry to stable from negative on the expectation that the trend of improved sales and access to funding will continue in 2013, the company said on Friday.

"Moody's expects property sales to grow in the single digits in percentage terms over the next 12 months," said Franco Leung, a Moody's assistant vice-president.

"Easing mortgage financing for first-time home buyers, increasing development of mass-market products, solid underlying demand, and continuing urbanization will lead to improved sales, which in turn will lower the inventories of property developers," he added.

Developers have been recording positive year-on-year growth in sales since June, after they started building more mass-market housing, which caters largely to first-time homeowners. These first-time buyers are usually based in lower-tier cities, where the government's restrictions on home purchases are less stringent.

"But average selling prices are likely to decline mildly for at least the next 12 months, because developers have now shifted their focus to mass-market projects and away from luxury homes," said Kaven Tsang, a senior analyst at the company.

In addition, Moody's believes that the Chinese government is unlikely to impose further regulatory restrictions to tighten the property market, because the current restrictions have been effective in controlling speculation and reining in prices.

In the absence of a material increase in average selling prices - a situation that Moody's believes is unlikely - the regulatory environment will not change significantly next year.

"A further cut back in investment in the property sector would also weigh on an already slowing economy and make it difficult for the government to achieve its stated target of GDP growth of 7.5 percent," Tsang said.

Moody's also expects that developers will be able to refinance debt maturities expiring in the next two years, as a variety of funding channels, such as offshore bond financing and asset sales, are now available to them. In addition, only a limited amount of offshore bonds will mature between 2012 and 2014.