Mainland home sales fail to gain momentum despite rate cut

A pickup in mainland property sales proved short-lived as the market lost momentum in the second week after the country's first interest rate cut in more than two years, putting in doubt the sustainability of any policy-induced recovery.

According to data from the China Real Estate Index System, which is run by the country's largest real estate website operator SouFun Holdings, property sales in the 41 cities it monitored in the week to December 7 dropped 13.5 per cent from the previous week, when they climbed 9.8 per cent.

Thirty of the 41 cities suffered a drop in sales.

The first-tier cities - Beijing, Shanghai, Guangzhou and Shenzhen - together took the biggest hit, with a 29 per cent fall.

Second-tier cities fared better with a loss of 8.6 per cent while third-tier cities saw a decline of 15 per cent.

CREIS attributed the decline at the start of the month as seasonal, adding that the transaction volume was higher than the level before the policy relaxation, and was 3.5 per cent more than in the same period last year.

"Developers are quickening their pace of launching new projects, driven by positive policies and year-end efforts to push up annual sales performance," the consultancy said in a report. "That has led to high inventories, and destocking remains their first priority."

The consultancy's data showed unsold property in 18 key cities rose 1.66 per cent last week from the previous week, driven by a 13.81 per cent increase in Hefei, Anhui province.

The property space available for sale in Beijing grew 4.96 per cent and increased 3.06 per cent in Shanghai to a new record.

"Although transactions look good, the inventory is huge," said Lu Qilin, the research head of consultancy Shanghai Deovolente Realty. "Property prices [in the next few months] will be under downward pressure."

The mainland switched its policy to support the property sector at the end of September when the central bank relaxed mortgage rules, encouraging commercial banks to provide faster and cheaper loans to first-time homebuyers, as part of the central government's efforts to stem a slowdown in the broader economy.

The People's Bank of China then followed with an interest rate cut on November 21 to further stimulate housing demand.