Trial now

Pullback Considered Corrective


Holding Above Recent Lows


BLOCK, Large 3Y Midcurve Put Condor

     BEIJING (MNI) - China's property sales are expected to decline as much as
5% next year due to the high base this year and a possible slowing of sales in
lower-tiered cities, S&P Global Ratings said Monday.
     In a webcast gauging the future outlook of the Chinese property sector, the
ratings agency said the projected drop of sales growth could be attributed to
the robust sales this year pushing the base to a high level. S&P said that
national property sales rose 10% from January to October, which was above
expectations, but that they fell markedly in October, with a year-over-year
decline of 3.4%, signaling a slowing trend.
     Sales growth in lower-tiered cities, which the ratings agency said had
greatly boosted China's overall property sales over the past year, is also
expected to slow, weighing on overall national sales growth next year, S&P said.
     The property market in lower-tiered cities has been heating up this year
due to the spillover effect from high-tiered cities as the government rolled out
much stricter curbs in the higher-tiered cities. But lower-tiered cities are now
also more sensitive to policy tightening due to their less solid economic
fundamentals, Matthew Chow, director of corporate ratings at S&P Global, said in
the webcast. 
     Supply and demand dynamics are also changing, Chow said, referring to the
reduction in supply of property units in lower-tiered cities based on slowing
     "Local governments are trying to get the situation under control" by
tightly controlling the growth in the average selling price of properties, Chow
     In line with its previous predictions and analysis, S&P said consolidation
of property companies would continue and even quicken for the rest of this year
and next year. 
     Property developers with more reliance on alternative funding will face
greater debt pressures, S&P said. Trust funding has increasingly become a
funding channel property companies resort to because Chinese government bodies
such as the China Banking Regulatory Commission and the People's Bank of China
have stepped up measures to control credit flowing into the property sector.
     Although revenue of developers is expected to increase next year, their
weakening debt sustainability may pose a negative factor, forcing them to reduce
land acquisitions, S&P said.
     The ratings agency also addressed the development of real estate investment
trusts, or REITs, saying the government would open up the sector as it tries to
reduce investment into the physical property market as it tries to boost the
rental property sector.  
     S&P also noted that property companies with stronger balance sheets could
expand into the leasing property market and become more profitable in the longer
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
--MNI Beijing Bureau; +86 (10) 8532-5998; email:
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