Policy loosening puts Chinese developers on track for mild growth in 2016

HONG KONG - China's property developers are largely on the road to recovery, according to Standard & Poor's, which says that residential housing sales increased in the first 10 months of 2015 by a healthy 18% on-year (National Bureau of Statistics figures. Average selling prices in many cities moved into positive month-on-month growth.

"We believe that most of the developers we rate will be able to meet their annual targets in 2015, paving the way for credit profiles to
stabilise," says S&P credit analyst, Dennis Lee. "But individual players in the sector will likely face some rocky patches."

S&P is forecasting that sales in 2016 will grow by up to 5%, mainly driven by increases in average selling prices. Ongoing policy loosening and recovering market sentiment will continue to support an overall price recovery.

Developers are refocussing on tier-one and tier-two cities that have higher Average selling prices, and no longer emphasise scale with massive expansion into lower-tier cities, as they did a few years ago. “Higher land costs should constrain a rapid ramp-up in scale and force developers to shift to better preservation of profitability,” S&P says. www.standardandpoors.com (ATI).