China’s overall economic pulse is slowing while some sectors stabilize and slip into higher gear. This hasn’t escaped the notice of Moody’s Investors Service.
On the heels of residential property sales hitting a record high in May, Moody’s changed its outlook on China’s residential property sector on Monday to stable from negative.
The ratings agency attributed the improvements to the Chinese government’s more supportive monetary and regulatory policies since the second half of 2014. These policies include mortgage options, reduced down-payments and helping buyers to finance second homes with bank loans. Last year, Moody’s predicted a negative sales growth for 2015.
Moody’s predicts property values nationwide will grow as much as 5% over the next 12 months. Nationwide property sales volumes in April grew 7.7% year over year, the first growth since November 2013.
It added that the ratio of inventory to contracted sales has declined from the March high of 15.2 months and will continue to decline over the next year.
Finally, funding conditions will remain supportive. Moody’s said it expects domestic banks to continue lending to the property sector because of “the loans are generally secured by properties.”
Moody’s added that sales growth for rated developers will surpass the broader industry, growing as much as 10%.
According to the China Index Academy (CIA), the largest independent property research organization and part of SouFun Holdings, total sales in terms of floor space increased in 38 cities in May, reported China Daily. They climbed 14.6% to 24.6 million square meters compared to April and 37.3% year over year. Sales in first-tier cities jumped 83% in May to 4.69 million square meters, compared with the same period last year. Sales in second-tier cities climbed 25% to 15 million square meters, while third-tier cities increased by 49% to 4.8 million square meters.