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Mainland property sales showed signs of recovery at the weekend in the wake of a cut in interest rates - but analysts believe a meaningful rebound now greatly depends on the performance of the economy.
The People's Bank of China announced a 25-basis-point cut to rates on loans and deposits effective from last Friday. The change took the benchmark one-year lending rate to 6.31 per cent from 6.56 per cent, while the one-year deposit rate fell to 3.25 per cent. 
The cut was the first since 2008 and came as Beijing wrestles to reverse a deepening economic slowdown as the euro-zone debt crisis worsens. 
'Our firm received more inquiries for buying new homes over the weekend. Sales in the secondary market also increased,' said Dickson Wong Hung, chief executive at Centaline (China) in Northern and Southwest China. 
Two new projects being marketed recorded strong sales, he added. 
One of the projects is Hong Kong-listed Sunac China Holdings' phase three of West Chateau in Beijing. The average price of units in the luxury project since its launch on Saturday is 15 million yuan (HK$18.37 million), and the developer has so far generated 800 million yuan from the strong reception shown by buyers. 
Another project is phase five of Sui Xie Chun Tian in Shenzhen, which was launched on Sunday. About 1,000 flats were released for sale and agents said 4,000 subscribed to buy units.
Centaline's Wong said about 80 per cent of the flats were sold on the first day of the release.
 Mainland newspapers reported the developer generated sales of 1.6 billion yuan within the first six hours of the launch. 
'The cut in interest rates signalled that government policy is changing. It will improve market sentiment in the short run,' said Wong, who noted that property transactions had also begun to increase in April as developers cut prices to encourage demand. 
'If the price-cutting in new projects continues, sales will remain active in the short run since home buyers will have reduced mortgage repayments after the cut in interest rates,' he said. 'But sales will drop if developers stop cutting prices in new projects.'
 In the longer term, said Wong, the outlook for sales would depend on economic performance, whether or not monetary policy was loosened. 'If the mainland's economic performance worsens, people will withhold their buying plans.'
Alan Chiang Sheung-lai, head of residential property on the mainland for DTZ, said the cut in interest rates had improved market sentiment. 'However, the help it was able to give to the property market is limited,' he added, noting that housing demand continued to be curbed by restrictions on buying second homes.
For developers, the impact of the rate cut was also limited, Chiang said. 'The problem for developers is that they can't get financing from the banks. Even though they may be willing to pay higher interest rates, the banks continue to tighten their lending to developers,' he said. 
A report from CCB International, a securities firm owned by China Construction Bank, said the rate cut was aimed at stimulating economic activity and boosting property sales by lowering the debt burdens of both developers and property owners. 
Developers that were highly geared would benefit the most as their debt burden would be reduced the most, said CCB, which singled out Greentown China and Guangzhou R&F Properties as the biggest beneficiaries since their net gearing ratios stood at 148.7 per cent and 85.9 per cent respectively at the end of last year.
72% 
The residential market is still developers' favoured sector, with about this percentage of real estate investment going to the sector.



Rate cut bolsters market sentiment at new projects