Moody's view on property sector dims amid fears of tighter lending

Credit agency Moody's Investors Service has taken a pessimistic view of the mainland's property sector amid concern that the China Banking Regulatory Commission might take action against questionable property lending.

As tight credit conditions are likely to prevail in the next 12 to 18 months, Moody's expects developers to face challenges in funding projects from domestic and overseas sources, while encountering a more difficult sales environment.

'The overall sector faces negative prospects in the near to medium term,' Moody's said in its report, Chinese Property Developers: Greater Risk from Tighter Liquidity and a More Volatile Market.

Moody's rated 13 developers, pinning a negative outlook on Shimao Property Holdings and Road King Infrastructure and possible downgrades for Neo-China Land Group (Holdings), Hopson Development Holdings and Coastal Greenland.

It said the outlook for eight other developers, including China Overseas Land and Investment, Agile Property Holdings, and Country Garden Holdings remained stable. But most of the developers under review could withstand tighter credit conditions and a 25 per cent fall in projected sales this year, the report said.

Despite the central bank's denial that it ordered banks to further tighten lending for property development, the market was rife with talk the CBRC had told banks to review property lending from next week.