First-time buyers boost home sales in smaller cities

Another property giant, China Vanke Co Ltd, achieved more than 40 percent of its annual sales target during the first five months, company sources said.

The developers that have run into trouble didn't react properly to the shifting market, which has become more competitive, according to He, who added: "Only those focusing on the development of market-oriented homes will report positive business growth."

He attributed Evergrande's robust sales to the development of more market-oriented projects, especially in second- and third-tier cities.

Xu Jiayin, chairman of Evergrande, said prices in second- and third-tier cities will rise 5 percent in 2014 if GDP grows by 7.5 percent.

"Growth for the property market will be from sales in the second- and third-tier cities," Xu said.

Zhang Biao, general manager of Nanning Longbanyuan Real Estate Investment and Consultancy Co, said a market orientation will support the recovery of the property market.

"Urbanization will boost housing sales in the long term and developers should build more market-oriented products to meet inelastic demand from the fast-growing population of buyers in second- and third-tier cities," Zhang said.

According to the Ministry of Housing and Urban-Rural Development, there are about 80 million urban residents aged 24-28 who are potential homebuyers.

To support demand from first-time homebuyers, the People's Bank of China in May told major lenders to speed up mortgage approvals, a move Zhang said was meant to promote sales.

"Demand is still strong, especially in smaller cities. The government needs to introduce more policies to encourage homebuyers and to maintain stable economic development, since the property industry accounts for more than 15 percent of China's GDP," Zhang said.

Zhang noted that many cities have eased property purchase restrictions.

"More monetary policy easing and the removal of restrictions on multiple house purchases are necessary for a recovery of the property market," Zhang said.

Property weakness overhangs recovery	China Vanke says property sector's 'golden era' over