China property

Price cuts boost China new home sales

Momentum is expected to gain traction in the next few months in the face of Beijing's policy relaxation after sales of new homes surge 80pc

PUBLISHED : Wednesday, 15 April, 2015, 6:00am
UPDATED : Saturday, 18 April, 2015, 5:21pm

China's widespread price cuts for new homes drove sales 80 per cent higher last month from February in 10 key cities tracked by the SCMP-Creda index.

Analysts expect transaction momentum to gain traction in the next few months as the government relaxes policies to aid the struggling real estate market and boost economic growth.

Prices fell month on month in eight of the 10 cities except Beijing and Chengdu, but all recorded a gain in sales of 25 per cent in Beijing to 144 per cent in Shenzhen.

"Beijing posted a stellar performance with the booming of the mid- to high-end market, pushing up the average price," said Chen Sheng, the dean of the China Real Estate Data Academy, the partner of the South China Morning Post for the monthly index.

The capital registered a month-on-month price gain of 9.2 per cent in March, the fastest pace in six months and swinging from a drop of 12.31 per cent in February.

"Since 2014, mid- to high-end projects have performed better than lower-end ones in first-tier cities, while some affordable housing products have become very popular in second or third-tier cities," Chen said.

Prices also inched up 0.27 per cent in Chengdu as buyers turned to projects in downtown districts or suburban homes with better facilities after the Lunar New Year in the middle of February to preserve value.

China rolled out a series of supportive measures at the end of last month, including a cut in down payments for second-home buyers to 40 per cent from the previous 60 to 70 per cent.

Industry observers anticipate a recovery in home prices in first-tier cities such as Beijing, Shanghai and Shenzhen this year. But most of the lower-tier cities will remain mired in a glut.

Record-high inventories mean developers will stay cautious about raising prices as cash flow is their lifeline to stay afloat amid a quickening market consolidation, which will see the stronger players becoming bigger while the weaker ones disappear.

A recent visit by the Post reporter after the policy relaxation in Shenzhen found home sellers increased asking prices by up to 10 per cent in the secondary market while developers were receiving more viewers for their new projects.

The latest index showed new home sales in Shenzhen gained 143.96 per cent last month from February to 507,200 square metres. The city often records the smallest sales volume among the 10 cities due to its size and limited supply, but it beat Beijing last month.

Wuhan and Tianjin also enjoyed a more than doubling in sales volume.

In year-on-year terms, new home prices advanced in four cities, led by the 16.27 per cent increase in Wuhan. Chongqing was the top loser, with a drop of 8.45 per cent.

The good news for homebuyers is that affordability is gradually improving. The most affordable of the 10 cities is still Chengdu, with the average home price at 6,635 yuan per square metre and a new home costing 6.1 years of a local family's income.