Moody’s says Beijing’s support for property sector not enough to dispel gloomy outlook

Uncertainties around an economic slowdown, zero-Covid restrictions and fear that pre-sold homes might not be completed are all weighing on the sector, rating agency says

Contracted property sales will continue to fall 10 per cent to 15 per cent by the end of 2023 due to weak demand, senior analyst says

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A residential area of Shanghai. The impact of Beijing’s support will be subject to the extent and timing, as well as the effectiveness of these measures, according to Moody’s. Photo: Bloomberg

Published: 7:50pm, 17 Nov 2022Updated: 7:54pm, 17 Nov 2022

The outlook for China’s US$2.6 trillion housing market remains gloomy despite the rescue measures rolled out by the central government this week, Moody’s Investors Service said on Thursday.

Uncertainties around an economic slowdown in China, restrictions under its zero-Covid policy and the risk that pre-sold homes might not be completed are all weighing on the sector, the international rating agency said.

“China’s property sector remains [with] a negative outlook, as contracted property sales will continue to fall 10 per cent to 15 per cent by the end of 2023 due to weak demand,” Kelly Chen, a senior Analyst at Moody’s, said in a report released on Thursday.

The Moody’s forecast comes after Beijing rolled out a slew of detailed measures on Friday last week, which have buoyed markets this week with an index of mainland Chinese property developers rising 11.4 per cent as of Thursday.

The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued a notice to financial institutions on Friday, laying out plans to ensure the “stable and healthy development” of the property sector. The notice included 16 measures, such as new policies to address the liquidity crisis at developers, as well as a loosening of down-payment requirements for homebuyers.

Following that, commercial banks were allowed to issue letters of guarantee to real estate firms for presale housing funds in escrow, according to a notice published by the CBIRC on Monday. These funds will be prioritised for payments linked to construction projects and to the repayment of debts, the notice said.

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