Sentiment in China’s property market is improving, with homebuyers in some of the biggest cities rushing to sales offices to scout for deals, days after the central government rolled out the strongest stimulus measures yet to rescue the troubled sector. Ma Yunman, Sales Agent at 5i5j Real Estate Brokerage based in Beijing’s suburban Fangshan district, said some 100 people visited its regional showrooms to view projects and consider purchases during the May 18-19 weekend, a 20% increase from the usual traffic on Saturdays and Sundays, she said. “The overall volume of inquiries has increased noticeably since the new support measures came out,” Ma said in an interview. “This is helped by the fact that prices for both new and pre-owned homes in our area have declined by 20% to 30% from last year.”
China unveiled “historic” measures on May 17, including a CNY300 billion re-lending facility for state-owned companies (SOEs) to buy unsold homes, to help stem a chronic slump in demand and confidence in the housing market over the past three years. Beijing has also called on local governments to buy finished projects and convert them into social housing, and offered to lower mortgage rates and down payment ratios to revive demand. Earlier sporadic measures by various city housing bureaus had failed to spur a turnaround, leaving many of the biggest developers in financial distress.
The rebound has been instant. More than 1,000 units were transacted during the May 18 weekend in Beijing, according to Centaline Property. The volume was on par with the daily average in March and April, which are seasonally “hot” months due to the release of pent-up demand from the Lunar New Year holiday. That may be a start to a long-haul recovery. The capital recorded sales of about 71,000 square meters in floor areas in the week through May 19, well below the weekly average of 94,000 sq m so far this year. It was also 26% weaker than the sales in the preceding week, according to China Real Estate Information Corp (CRIC). Ma at 5i5j Real Estate Brokerage said most of her clients are still adopting a wait-and-see attitude, even though home prices have retreated over the past few years. People still want to be cautious, instead of chasing the market. “A lot of people are still waiting for stronger support measures from both central and local authorities,” she added.
In Shanghai, more prospective homebuyers are asking sellers for more generous discounts. Weng Lingjie, a 40-year-old entrepreneur, said he would only buy a second-hand home in the Pudong district on a further 15% price cut. “It is a buyers’ market and we have the bargaining power,” said Wang, who is not alone in angling for bigger discounts. “Some non-local residents working in the city with a well-paid job are among people eyeing their first homes in Shanghai,” said Song Yulin, Senior Manager with property agency Lianjia, a unit of KE Holdings. “They are budget conscious.” In the week to May 19, Shanghai recorded an average 138,000 sq m of sales, or 30% above its weekly average this year. Total floor area sold also jumped 77% versus a week earlier, according to CRIC, the South China Morning Post reports.
But investors will need to see more positive signals from China’s property market before calling a stabilization in the industry, as the unprecedented bailout package may be insufficient to instantly turn around the sector, according to JPMorgan Chase. Expectations about an extended decline in home prices and shrinking incomes among wealthy families, plus jitters about the ability of cash-strapped private developers to deliver homes, will continue to keep homebuyers at bay, Zhu Haibin, Hong Kong-based Chief China Economist at the U.S. bank, said. An economic pillar that once accounted for a quarter of China’s economy, the market remains a potential drag on growth and a recent rally in stocks.
