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Despite the slower decline in China’s property sales in June, the recovery pace may decelerate as homebuyers’ confidence was undermined by the recent incident of mortgage defaults, said Moody’s Investors’ Service in a report on Monday.
Chinese regulatory bodies will likely introduce measures to control risks to project completion, which should lift homebuyers’ confidence and support the recovery of property demand, it said, adding that the pace of the recovery will mainly depend on policy measures.
As relaxation of property policies gradually kicked in, China’s contracted property sales fell by 23.4% in June from a year earlier, narrowing from the 41.7% drop in May.
Property developers’ financing environment remains tight, banks and investors favour large-sized and financially sound homebuilders, and banks may adopt higher risk control standards for newly granted home mortgage loans, while local governments may also ramp up supervision on developers’ pre-sales’ funding to lower risks to project completion, which may weaken the flexibility of developers’ use of funding, it said.
In addition, developers’ financing from offshore markets remained subdued, with bond issuance slumping, leaving them exposed to high refinancing risks, it said.
According to Moody’s calculations, mainland property developers will have about $27.7 billion onshore bond and $34.2 billion offshore bonds coming due or becoming puttable in the next 12 months.