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Research Report

17/07/2020 17:25

Move to cool Shenzhen property market hits demand - Moody's

[ET Net News Agency, 17 July 2020] Moody's Investors Service said in a new report that
the Shenzhen government's new measures to curb rising residential property prices are
credit negative for Chinese property developers, because they will suppress property
demand by reducing the pool of eligible buyers and discouraging second-home buyers.
"In the near term, the new regulations will delay developers' presale cash flow and
adversely affect liquidity. Looking further ahead, the regulations are likely to
accelerate industry consolidation as developers with small operations and weak access to
funding become less competitive, and face the risk of asset sales or exiting the market,"
said Danny Chan, a Moody's Assistant Vice President and Analyst.
Among Moody's-rated developers, the measures will impact Kaisa Group Holdings Ltd (B1
stable)(01638) and Logan Group Company Limited (Ba3 positive)(03380), which have
relatively large operations in Shenzhen.
Although demand for their properties in the city will likely drop, their competitive
product pricing, strong brand and ability to adjust to changing market conditions will
mitigate any adverse effects.
New measures include tightened eligibility for homebuyers, higher deposit requirements
for homes deemed as luxury residences, and lengthened holding period for VAT exemptions on
secondhand properties.
Shenzhen is a first-tier city along with Beijing, Shanghai and Guangzhou. The tightened
policies are in line with Moody's expectation that local governments will continue to
adjust regulatory measures to stabilize property prices and discourage investment and
speculative demand.
"We expect there will be policy tightening to curb property price growth in other cities
where price growth has also been strong," added Chan. (KL)

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