Moody's Investors Services says that the new down-payment requirements for
first and second home owners in China (Aa3 stable) are credit positive for the
country's developers because they will support demand for properties in
second-tier cities - and lower-tier cities to a lesser extent - by reducing the
upfront down-payment hurdle for first-time home buyers, while encouraging more
prospective upgraders or investors to purchase homes.
"While we do not
expect a material or immediate increase in residential property sales because
the central bank's move lowers the requirement by just 5-10 percentage points,
we believe the Chinese authorities will continue to implement policies to lower
total home inventory levels in the country," says Stephanie Lau, a Moody's
Assistant Vice President and Analyst.
"Second-tier cities will benefit
more from the new down-payment cuts than lower-tier cities, because of the
stronger demand from end-users and upgraders in second-tier cities," says Cindy
Yang, a Moody's Analyst.
Moody's analysis is contained in its
just-released report titled "Property -- China: PBOC Cuts Down-Payment
Requirement Further, a Credit Positive for Developers," and is co-authored by
Lau and Yang.
Moody's report points out that on 2 February 2016, the
People's Bank of China (PBOC) announced that banks can reduce the minimum
down-payment requirement to as low as 20% from 25% for first-time home buyers in
cities that do not have restrictions on home purchases.
The central bank
also reduced the minimum down-payment requirement for second-home buyers who
exhibit outstanding mortgages on their first homes to 30% from
40%.
Moody's report further points out that lower-tier cities face high
inventory risks, as indicated by the pressure on home prices in such cities, and
slow home sales. Moody's says that these cities will require further government
incentives to lower their stock of new homes.
Moody's also notes that
property markets in second-tier cities have been recovering gradually, after the
government's relaxation of restrictions over the past 12-18 months. Average
property prices in second-tier cities registered their first positive growth in
December 2015 since August 2014, reporting 0.6% year-on-year growth versus a
0.2% year-on-year decline in November 2015.
By contrast, prices in
lower-tier cities remain under pressure, registering a continual year-on-year
decline of 2.5% in December 2015.
Most Asian stocks rally as investors regain confidence in commodity
Asian stocks outside Japan are trading on higher note on early Asian hours. The main key driver behind the rally is rebound in Commodity prices. Oil as well as Gold prices rebounded overnight helping the investors to rebuild the confidence in commodities. WTI crude rose 1.07% to $32.59 a barrel following an early round of profit taking while gold is well supported around $1140 on Asian hours.Nikkei 225 index was trading 0.71% lower at 17,069.59 points. Apart from Japan, all other Asian markets are trading on higher note.
Kong's Hang Seng Index rallying 1.54% to 19,291.05 points.
China's Shanghai Composite Index adding 0.84% to trade at 2,761.47 points.
South Korea's Kospi Composite Index gained 1.05% to trade at 1,910.87 points.
Australia's benchmark S&P/ASX 200 index was 1.93% higher to 4,970.80 points on Thursday.
New Zealand's benchmark S&P/NZX50 adding just 0.09% to trade at 6,138.68 points