China's property market recovery is fragile, says S&P

HONG KONG - The robust recovery of China's property development market may not be sustainable, according to ratings agency Standard & Poor’s, pointing to the unevenness of a price rebound, competition for land reserves in top-tier cities, and increasing debt-fuelled expansion.

“Funding channels may also stop being so supportive," said S&P
Global Ratings credit analyst Cindy Huang.

The property market had a strong start to the year, with over 60% year-on-year growth in total sales over the first four months. The sharp acceleration was led by a 39% increase in the gross floor area sold and 16% rise in the average selling price.

“Despite the strong recovery in the property market, the financial situation of developers has not improved,” S&P says.

“Credit profiles deteriorated most for those companies that rushed into the next cycle of investment, mainly through aggressively stepping up land bank expansion and construction.

"As property sales continue to improve in 2016 and funding conditions remain favourable, the ability and discipline of developers to take advantage of the market recovery will be crucial to rating stability."  www.standardandpoors.com (ATI).