Property developers in China may face further price reduction of up to 10 percent in some major cities in the next 12 months, according to Standard & Poor’s Ratings Services report card titled “Chinese Real Estate Developers Are Wary As Correction Deepens”.
Despite regulatory uncertainty and sector volatility, developers in China are likely to be in a healthier position to resist such challenges, it said.
Bei Fu, credit analyst at Standard & Poor’s, noted: “The government’s policy attempts to prevent sharp price rises and speculative activities, which muted demand, have coincided with an abundance in supply of new property for sale.”
“Nevertheless, many developers have adequate liquidity and have already locked in the majority of their revenue for 2010. That will reduce the pressure to make drastic price cuts in the near term.”
She added that “the report card compares the rating and outlook trend today with that in February, when we published our last sector outlook report (Rankings of Chinese Real Estate Developers In A Sector Ripe For Consolidation, published on Feb 24, 2010).”
“Given the reasonable financial and liquidity position of many developers, we stand by our stable short-term outlook for the sector, despite the continued volatility and aggressive expansion of some players.”