A rebound in home prices in China’s 70 big cities extended into March, as industry sentiment continued to improve after unprecedented efforts by policymakers to stem a slump in housing sales. New-home prices in Beijing, Shanghai and other first-tier cities rose 0.3% from the previous month, compared with a 0.2% month-on-month gain in February, while those of second-hand homes gained 0.5%, extending a 0.7% gain a month earlier. Prices of newly built homes in tier-two cities from Hangzhou to Tianjin increased 0.6% and second-hand houses in these regions registered a 0.3% price gain, according to the National Bureau of Statistics (NBS). Weighted average prices of newly-built homes in the 70 cities tracked by the NBS rose 4.6% in March on a month-on-month basis, accelerating from a 3.7% gain in February, according to Goldman Sachs.
China’s property sector, together with linked sectors, account for about a quarter of the nation’s economy, and is considered too big to fail. The Chinese government took several measures to revive the sector, including scrapping restrictions on home purchases in some cities, cutting mortgage rates, and loosening access to funding to ease the liquidity squeeze on developers. “We expect more housing easing in the months ahead, but maintain our view that the recovery of the property sector would be gradual and bumpy, due to the challenging demographic trend, still-tight financing conditions for troubled developers and policymakers’ long-held stance that housing is for living in, not for speculation,” Goldman Sachs said in a report.
The central city of Wuhan led the price gains in March. New-home prices in the capital of Hubei province recorded a 1.3% month-on-month gain, the most among the 70 cities. Prices in Beijing and Shanghai rose 0.3% and 0.4% respectively. A report by the central bank suggested a continuing pickup in home purchases. Commercial banks advanced a record CNY634.8 billion in medium and long-term mortgage loans last month. A broader recovery in the housing market may be on the horizon as Beijing, where the strictest tightening of purchases has been put in place, is joining smaller cities in relaxing restrictions, although at a limited pace. The capital city’s housing authority proposed fine-tuning of policies on a district-by-district basis, which is largely interpreted as a move to prop up the property market in outlying Fangshan district that saw home prices tumble 48% last year.
Investors are unimpressed by the extent of the recovery, as a Bloomberg index of 33 Chinese property stocks that mostly trade in Hong Kong has dropped more than 8% this year. JPMorgan Chase said in a report this month that year-to-date sales at the top 100 developers were still 30% below the three-year average through 2021, while Chinese brokerage Shenwan Hongyuan said the pickup could simply be the release of one-off pent-up demand after the end of pandemic controls, and that the sector's recovery remained uneven with smaller cities lagging behind, the South China Morning Post reports.
Shanghai concluded its first land auction this year with the sale of all 19 plots for CNY51.9 billion, up 7% from their estimated value, signaling keen interest from major developers and the recovery of the property market. The four-day land sale saw more than 50 property developers engage in intense bidding that resulted in 15 plots selling higher than their floor price. One parcel on offer went through 55 rounds of bidding, while another lot was contested by as many as 28 bidders.
