Beijing posts first rise in used home prices for 2014

Prices of second-hand homes in the mainland's two most important cities headed in different directions last month, with Beijing posting the first monthly rise for the year and Shanghai recording its third consecutive decline.

Average secondary home prices in Beijing rose 0.3 per cent from August to 40,579 yuan (HK$51,380) per square metre, the SCMP-CTC index shows. In Shanghai, prices fell 0.1 per cent to 34,062 yuan per square metre, slowing from August's 1.6 per cent drop.

"Although Beijing and Shanghai have yet to scrap home-purchase restrictions, market expectations are clearly changing due to the relaxation of credit policies," said mainland consultancy Century 21 China Real Estate, which partnered the South China Morning Post on the index. "Both secondary housing markets showed signs of recovery."

In year-on-year terms, prices dropped 2 per cent in Beijing but were up 6.4 per cent in Shanghai.

Most of the more than 40 cities that have imposed home-purchase restrictions since 2010 have relaxed their controls in the past few months, as local governments try to stimulate demand.

The property market is crucial to the nation's economic growth. A cooling market since early this year has challenged the top leaders' efforts to keep growth at about 7.5 per cent for the year.

The People's Bank of China last month announced its clearest policy relaxation regarding the property market since 2010, urging banks to grant preferential mortgage loans at up to 30 per cent cheaper than the benchmark rates to homebuyers who have paid up their first and only mortgage loans.

Banks must also speed up loan approvals and press ahead with innovations such as mortgage-backed securities and real estate investment trusts as new channels to fund the property sector.

Two weeks after the statement, some commercial lenders have started to offer cheaper mortgage rates, but mostly by up to 10 per cent off, as their own funding costs through issuing wealth management products are rising.

Whether and how quickly the property market will recover now depends on the central government's determination to protect growth, as well as how developers will price their new launches, some analysts say.

"Transactions are pretty good, although not as ideally expected for the golden September," said CTC, referring to the industry term for a traditionally strong sales month.

Sales in Beijing grew 7.2 per cent from August to 10,137 units, accelerating from the previous gain of 3.3 per cent. They were down 31.9 per cent from September last year.

In Shanghai, the number of transactions dropped 3.84 per cent to 13,146 units and was 53.53 per cent below the figure a year earlier.

With new policies gradually getting implemented, first-home buyers and upgraders will come back to the market. On the supply side, some sellers of flats in good locations had decided to raise their asking prices, Century 21 China said.

"Secondary home transactions will probably continue to grow this month," it said. "However, a significant rebound looks impossible so far in both price and volume terms."