Chinese Property Developers Are In Better Financial Positions

China’s real estate industry is on a firmer footing compared with a year ago, says Standard & Poor’s Ratings Services today in a report.

The rating agency says that many Chinese developers have refilled their war chests as a result of record sales growth and healthy financing windows that led bond issuance to double in 2013.

But the high prices of housing and land in several regions of China are likely to prompt more local governments to take steps to cool their markets.

Standard & Poor’s expects real estate sales growth to moderate in 2014. Some developers will adapt to the environment better than others.

"In our view, central-government regulations will likely have a neutral impact on the industry in 2014," says Standard & Poor’s credit analyst Bei Fu.

China’s third plenum of the Communist Party did not produce any major new policy targeting the real estate sector. But in the past few months, some local governments have tightened existing regulations.

"Buyers in tier-1 cities, such as Beijing and Shanghai, and top tier-2 cities face further lending and purchase restrictions. The developers’ geographic diversity of and sales execution will therefore determine the impact of the sales slowdown," Fu says.

Standard & Poor’s says that a few Chinese developers face rising default risks, including Renhe Commercial Holdings Co. Ltd. and Glorious Property Holdings Ltd.

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