Signs of life in housing market

Shanghai property agent Wang Jianjun smiles broadly as he declares with undisguised delight that he brokered the sale of a 60 square metre home on Saturday. And well he might. The commission on the 1.5 million yuan (HK$1.84 million) deal will amount to about 30,000 yuan, of which Wang will get about 4,000 yuan. Wang says his commission income has been on the rise in the past few months after a lean spell at the end of last year. 'I did not make a single sale during the three months from October to December,' Wang, who focuses on sales in the secondary housing market, said. 'But the market has been warming up ever since the Lunar New Year.' From zero in the last quarter of last year, Wang has been closing one to two deals every month in the past few months, and says he and his colleagues are enjoying the results in rising commission income. Their anecdotal evidence of a market upturn is backed by property analysts, who say the pace of housing sales appears to have picked up since March. But they hesitate to call the rebound a full recovery. 'A series of restrictive policies has been implemented by the central government since April 2010, and over the space of two years sales volumes have been well below their long-term averages,' Anton Eilers, executive director of residential markets in Asia for property consultancy CBRE, said. But sales have recently shown signs of picking up, and a sales report for May published by the country's real estate website, SouFun, said sales in 34 out of 40 large cities across the mainland recorded month-on-month increases from April to May. China Vanke, the mainland's biggest property developer, said its May sales totalled 10.72 billion yuan - up 44 per cent on the previous month, and 19 per cent on the same month last year. Evidence of the improved market sentiment was on display last week as hundreds of homebuyers queued to buy flats in new projects in Beijing, Shenzhen, Qingdao, Nanjing and Shanghai, according to mainland media. Some queued up overnight to get the pick of the flats on offer. Among the new launches to attract buyer attention is The Spring Land in Shenzhen's Longguan district. Developer Top Spring International said it sold 820 units in the project's fifth phase on the first day of sale on June 10. It was the first new project launch since the government announced a 25 basis point cut in benchmark lending rates to 6.31 per cent on June 7 - the first in four years. Eilers acknowledged that demand had increased recently, triggered by lower selling prices and cheaper borrowing costs. 'Given 20 to 30 per cent [price] discounts on certain new launches, the recent easing in both the interest rate discounts that banks can offer to buyers, as well as reduction in interest rates themselves, it is not surprising to see volumes pick up significantly,' he said. On top of the interest rate cut, the central government has loosened controls on banks' lending and deposit rates, amid efforts to combat a deepening slowdown as Europe's debt crisis threatens global growth. Property agents said several projects had recorded strong sales as their asking prices were far below market expectations and banks were offering discounts on the 6.8 per cent benchmark mortgage rate. China Vanke president Yu Liang said the recent increase in sales was bolstered by lower selling prices. But he told mainland media that he was not optimistic about the immediate outlook because there was about 114 million square metres of housing inventory on the market. CBRE's Eilers said the market upturn had only been evident for the last two to three months, and it remained to be seen whether it marked the bottom of the down cycle, or was a only a short-term rebound. The market remained highly sensitive to changes in sentiment, he added. 'Once policy seems to be moving towards easing, buyers will return to the market, though most of this is end-user - not investor - demand,' he said. Ellis Wong, from Centaline Property Agency's Guangzhou branch, said demand was not yet strong enough to push up market prices. 'There are still many luxury properties that need investor support, and only once land sales become active again can we say there are concrete signs of a housing market recovery,' Wong said. On June 18, mainland developer Evergrande Real Estate bought a commercial site in Guangzhou's new business district for a city record price of 32,968 yuan (HK$40,353) per square metre. However, Eilers said he did not see this as the start of a trend of developers bidding aggressively to secure construction sites. 'There is certainly renewed interest in looking at sites, though it is too early to comment on whether due diligence will result in a significant increase in land sales volumes,' he said. 'It is also highly dependent on the types of sites the government releases for sale.' Eilers added, however, that if policy continued towards an easing stance he would expect sales volumes to continue to firm, though they would not immediately return to their long-term averages.