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S&P: China property developers may faces price cuts of 10% in main cities

HONG KONG: China's property developers may face further price cuts of up to 10% in major cities in the next 12 months, says Standard & Poor's Ratings Services.

It said on Monday, Oct 11 that despite the sector volatility and regulatory uncertainty, the developers appear to be in a healthier position to withstand such challenges compared with the downturn of 2008.

"The government's policy attempts to prevent sharp price rises and speculative activities, which muted demand, have coincided with an abundance in supply of new property for sale. As a result, we believe there is room for average selling prices to adjust downward in the near term," said S&P credit analyst Bei Fu.

"Nevertheless, many developers have adequate liquidity and have already locked in the majority of their revenue for 2010. That will reduce the pressure to make drastic price cuts in the near term," she said in a recently released industry report card by S&P, titled “Chinese Real Estate Developers Are Wary As Correction Deepens".

The report card compares the rating and outlook trend today with that in February, when it published the last sector outlook report entitled “Rankings of Chinese real estate developers in a sector ripe for consolidation."

It also comments on the performances and credit outlooks on more than 20 developers and ranks them according to their credit profiles.

"Given the reasonable financial and liquidity position of many developers, we stand by our stable short-term outlook for the sector, despite the continued volatility and aggressive expansion of some players," said Fu.
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