Hangzhou market’s green shoots need watering by further policy easing
Analysts call for cuts in taxes and mortgage rates to fuel sales pickup after city scraps buying curbs
While there are tentative signs of a housing market recovery in Hangzhou, the city needs to further relax policies to sustain the momentum, industry analysts said.
The capital of Zhejiang province is at the epicentre of a still unfolding downturn in the property market.
Its housing sales and inventory levels are closely watched by investors to gauge the health of an industry that drives about 25 per cent of the mainland economy, the world's second-largest.
On Friday, the city government scrapped purchase restrictions for homes larger than 140 sqmetres after it lifted similar controls on those below that size a month earlier.
Property sales in the city's main urban area, excluding Yuhang and Xiaoshan districts on the outskirts, soared to 266 units on Friday and then to 356 on Saturday, up from an average daily of 71 when the home purchase restrictions were in force.
Between July 28, when the controls were partly removed, and Friday, the daily transaction volume had increased to 113 units.
In the next few months, Hangzhou should cut taxes and mortgage interest rates to maintain the sales volume and, more importantly, buyers' sentiment, said Zhou Chen, a senior manager with consultancy Century 21 China Real Estate.
"Otherwise, the market will slip back," Zhou said. "One or two shots in the arm are not enough to cure a patient with critical illness."
However, developers seem more optimistic.
The most affected players include Greentown China Holdings and Zhong An Real Estate, according to global ratings agency Moody's, which said most of the 51 developers it rated had less than 10 per cent of their land bank in Hangzhou.
Greentown and Zhong An would benefit the most from the removal of purchase restrictions on larger homes, "because these companies have meaningful amounts of these units in their inventory", Moody's said.
Shi Kancheng, Zhong An's chairman, said last week: "I believe property sales in Hangzhou will gradually pick up in the next few months. The sluggish period is over."
Shi said the company would probably buy new land in the main part of the city later this year.
Zhong An said the relaxation of the market-cooling measures would push up its sales and profit margin in the second half.
The company generated 79 per cent of its first-half booked sales from Hangzhou, including its suburbs, and had 48 per cent of its land bank of 6.59 million sqmetres there at the end of June.
Sun Hongbin, the chairman of Sunac China Holdings, said he would continue to acquire land in Hangzhou, citing strong housing demand.
Sunac is in the process of clearing regulatory hurdles to buy 24.3 per cent of Hangzhou-based Greentown.
While sales in Hangzhou are increasing, prices remain under pressure from an overhanging inventory of 136,000 units in the main part of the city.