The outlook for China's residential property market in 2017 is stable, Moody's Investors Service said in a report on Monday. A sharp decline in home prices is "unlikely" in the next six to 12 months, given relative low inventory levels in first- and second-tier cities, the report said.
In fact, home prices are projected to rise modestly in 2017 against an already high base, said Kaven Tsang, a Moody's vice presideent and senior credit officer In 2016, total sales value will have risen 25 percent by the end of the year from a year earlier, due to a fierce price rally mainly propped up by China's bigger cities, Tsang said.
But sales volumes are likely to decline around five to 10 percent in 2017 due to tightening measures implemented in major cities in September and October, the report said. However, it noted that restrictions were less severe than those seen in previous cycles in 2011 and 2014, and monetary conditions remain broadly supportive to the property sector.
It said onshore liquidity will remain adequate in 2017, supporting access to funding for developers and mortgage availability for home buyers, despite an expected slight tightening in mortgage financing and onshore bond markets. Refinancing risk is also manageable for developers in the next 12 to 18 months, given the relatively small amount of onshore and offshore bonds maturing through 2017, the report said. Domestic banks will likely remain selective, favouring large developers with healthier financials and focusing on first-time buyers and upgraders when offering mortgage loans.
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