A new round of market controls could be on the way in China’s largest cities, according to Moody’s Investors Service.
The credit ratings agency made its prediction following news that home values in China’s 70 major cities extended their gains in April 2016 with 46 cities recording price increases on an annualized basis — up from 40 in March.
First-Tier City Price Increases Could Become Policy Targets
“We believe tightening in policy measures could be targeted at cities with strong price growth, but will not be applied uniformly nationwide. Policies will remain supportive in lower-tier cities, where property prices remain sluggish,” said Moody’s vice president and senior credit officer Franco Leung said in a statement.
According to data released last week by the China Index Academy, the number of cities recording an increase of 5 percent or more during May rose to 17 cities from 14 during June. Larger cities including Shenzhen, Shanghai, Nanjing and Wuhan experienced robust growth with Shenzhen registering a 63.4 percent year-on-year gain followed by Shanghai at 34.2 percent.
Significant price increases have in the past triggered government tightening measures such as higher down payment requirements and limits on buyer eligibility, which went into place in Shanghai and Shenzhen in March this year. These restrictions even provoked a local government clampdown in the eastern Chinese city of Suzhou after a buying spree from investors spurred a 54 percent rise in homes values in the year to April.
Moody’s Leung believes, however, that further restrictions would most likely be limited only to cities that have experienced strong price growth, while lower-tier cities will enjoy accommodative policies especially considering their tepid performance.
Single-Digit Sales Growth Expected by 2017
The agency also predicts that home sales in China will decelerate to single-digit growth by May 2017 after increasing by 16.6 percent in 2015 and going up by 32 percent in the 12 months ending April this year.
The monthly report also notes that, out of 50 Chinese developers rated by Moody’s, nearly half had negative rating outlooks as of May 2016, including one of China’s biggest cross-border real estate investors Shanghai-based Greenland Holding Group.