The outlook is looking a tad brighter for China’s real estate developers. That’s a key finding from Standard & Poor’s Ratings Services’ latest review of the sector titled “Top 10 Investor Questions: Chinese Real Estate Developers”. According to the report, signs of stabilization are emerging for the sector, which has been battling tricky market conditions and debt-related challenges in the past year. Importantly, the report notes that operating and credit conditions have improved in recent months, and it says that buyers are returning to the market after staying on the sidelines for much of 2011. Sales are rising after the government relaxed credit restrictions and cut interest rates. Although property prices may still fall over the next six months as developers move to clear inventory, Standard & Poor’s estimates the dip at less than 5% in the second half of 2012.
And while it’s clear that Standard & Poor’s is becoming less negative on the sector’s outlook, tough times still lie ahead for many industry players–particularly in the residential space. For example, the report says the polarization of stronger and weaker developers has become increasingly pronounced. What’s more, rating trends remain negative; the majority of Standard & Poor’s ratings on sector participants have negative outlooks, reflecting the issuers’ weakened credit profiles and liquidity. Even so, a small number of positive actions may occur in the next six-to-12 months. That’s because some developers’ property sales have been better than we expected, while some companies have eased their liquidity pressures through asset sales or refinanced large offshore maturities.
To see the report, click here.