Recovery in mainland property market expected to be short-lived

PUBLISHED : Tuesday, 09 December, 2008, 12:00am
UPDATED : Tuesday, 09 December, 2008, 12:00am

Home purchases in some major mainland cities rebounded last month, but property consultants are unimpressed.

Although more buyers seemed to be willing to enter the market, driven by central government stimulus measures and continued price cuts by developers, property consultants say the rebound could be short-lived as most potential buyers were still waiting in the hope of a new round of policies to boost the industry.

In Shenzhen, 6,435 transactions for new residential properties took place last month, an increase of 90 per cent from October, according to official figures. Agents said the number of transactions in Shenzhen's secondary market rose 30 per cent to 4,500 last month.

Beijing saw new home sales jump 64 per cent month on month, while Shanghai witnessed a 36 per cent rise. Chongqing recorded a similar spurt.

'Property sales in the new and second-hand property markets in Shenzhen jumped, partly boosted by the government's stimulus package,' said Samuel Wong, the district director of Midland Realty's Shenzhen branch.

Taking advantage of the improved sentiment, developers accelerated sales by cutting prices further, Mr Wong said.

One agent said China Vanke, one of the mainland's largest developers, cut prices for its luxury properties in suburbs by 20 to 30 per cent.

A townhouse project in Longgang district was being sold at 10,000 yuan (HK$11,267) per square metre, compared with an asking price of 13,000 yuan per square metre a few months ago, an agent said.

In the past two months, Beijing has announced a series of measures targeting prospective homebuyers.

These included lowering the deed tax to 1 per cent from 1.5 per cent for first-time buyers of flats under 90 square metres, lowering mortgage down payments to 20 per cent from 30 per cent and reducing mortgage rates to 70 per cent of base lending rates for both first-time buyers and those upgrading their homes.

On November 26, the central bank cut benchmark lending and deposit rates by 1.08 percentage points.

Clement Luk, the director of Centaline China's Shanghai office, said sales of new homes rose last month but buyer sentiment had not fully recovered. Some potential buyers, either concerned about the economic outlook or expecting more government boosting measures, had adopted a wait-and-see attitude, he said.

There have been rumours that buyers in Shanghai may get tax rebates. A similar rumour has been circulating in Chongqing, with media saying the city government plans to offer individual income tax refunds on first-home purchases.

If such measures are adopted, it would be the latest significant property stimulus measure by a local government since the sharp cut in interest rates on November 26, according to Jing Ulrich, the managing director and chairman of JP Morgan's China equities.

Mr Luk said the market's bottom was hard to predict. Buyers would only return to the secondary market when owners cut prices more than 20 per cent, which meant prices would continue to fall, he said.

Price incentives

In Shenzhen last month, transactions for new residential properties rose: 90%