China property sales growth to slump in 2016: Moody’s

The ratings agency said that growth in property sales across the country would slow to 0-5 percent in 2016, after a strong performance of 16.6 percent in 2015.

“Operating conditions become more challenging in 2016, given slowing economic growth, as well as the developers’ still-high debt leverage, margin pressures and high inventory levels in low-tier cities,” Kaven Tsang, a Moody’s senior credit officer, said in a report from Hong Kong.

Many developers bought land aggressively in 2013 and early 2014, increasing debt leverage and weakening financial metrics, according to Moody’s.

“The overall leverage of our rated developers remains high, which increases their vulnerability to a down-cycle,” Tsang said.

Moody’s also reported that residential home prices for China’s 70 major cities continued to gradually recover last month. While the number of cities registering year-on-year price increases remained the same, the number of cities posting gains of more than 5 percent rose to seven, from five in November.

Chinese economic growth has steadily slowed since 2010 and the government reported economic expansion of 6.9 percent for 2015, a 25-year low that was in line with forecasts from the International Monetary Fund.