Home sales rebound in China's big cities

BEIJING - Home sales in China's largest cities rebounded in April, after a poor first quarter forced authorities to loosen some curbs on the market.

On March 30, the central bank, housing ministry and banking regulator changed the rules on down payments for second-home mortgages. The minimum deposit was reduced from 60 percent to 40 percent. For first homes, only a 20-percent deposit is required. The Ministry of Finance decided on the same day that homes held for two years or more would be exempt from transaction taxes when sold. The previous minimum was five years.

As a result, property sales in April gained 15 percent, making April the first month of sales growth nationwide for roughly a year and a half, said Wang Tao, chief China economist with UBS.

In the 54 cities monitored by real estate agency Centaline, more than 250,000 homes are expected to have been sold during April, up 10 percent from March.

"The rebound is most evident in top-tier cities, where roughly 50 percent more homes were sold in April than in March," said Zhang Dawei, Centaline research director. Some new residential complexes in Beijing, Shanghai, Guangzhou and Shenzhen have seen all their units snapped on the first day of sales.

In Beijing, more than 8,300 new homes were sold in April, up 44.5 percent from March. Existing home sales more than doubled from a year ago to over 14,500, according to real estate broker Lianjia.

In Shanghai, home sales also came alive in April after a weak first quarter. New home sales in terms of floor space rose almost 60 percent from March and were more than double those in the same period a year ago, according to Centaline.

The heat is on

Policy easing should lift sales in the months ahead. At an annual property exhibit in Shanghai during the May Day holiday, developers such as Greenland Group, Poly Real Estate, Evergrande and Greentown showcased nearly 300 residential complexes in anticipation of an influx of potential home buyers.

A year ago, the Chinese property market was heading for the basement as inventories built up and price cuts began to spill over from less prominent cities to the big metropolises. One third of properties on display at the exhibit last year were in cities other than Shanghai or even abroad. This year, Shanghai accounts for 90 percent; its highest share for three years.

Developers have also become unwilling to budge on prices and are offering fewer discounts. In a survey by real estate information provider SouFun, nearly 60 percent of respondents claimed plans to buy homes this year, many in the next three months.

"When buying sentiment is very strong, it is normal for developers to scale back discounts or even withdraw them altogether," a sales representative at the exhibit told Xinhua.

Less painful correction

While easing has helped the biggest cities and done some good in the second tier, it has done little to revive third- and fourth-tier cities. In the three weeks when big cities experienced double-digit sales growth, smaller cities recorded a 26-percent decline.

Despite the improvement, Wang of UBS expects new housing starts in April to remain muted, as developers focus on slashing inventories.

A meeting of the Political Bureau of the Communist Party of China Central Committee on April 30 called for more "forceful" policies and "a long-term mechanism for the healthy development of the property sector".

The central bank has lowered interest rates twice since November and cut the reserve requirement ratio twice since February. Most analysts believe this year will be easier for developers than last.

"We expect 2015 to remain challenging, but less so than 2014, because the government will likely continue to loosen restrictions," said Franco Leung, a senior analyst with rating agency Moody's.