Secondary home transactions may have peaked in Shanghai and Beijing

Although prices are still rising, sales of second-hand homes in Shanghai and Beijing declined last month from July, the SCMP-Century 21 index showed, indicating the policy-induced housing market recovery is losing momentum.

The average asking prices for existing homes inched up 0.1 per cent in Beijing to 42,780 yuan (HK$52,009) per square metre and 0.8 per cent in Shanghai to 35,893 yuan per square metre.

However, sales dropped 9.7 per cent in the capital to 20,737 units and fell 0.67 per cent in the financial hub to 34,707.

"A golden September is still possible, as the government has been trying to stimulate demand," said Century 21 China Real Estate, a consultancy that has partnered the South China Morning Post in the monthly index covering housing market activities in the country's two most important cities.

The home price index in Beijing stayed unchanged at 163, while that for Shanghai rose to 148 from July's 147.

In the past few weeks, the authorities have cut interest rates for the fifth time since November last year and lowered the down payments for second-home buyers to borrow more from subsidised housing provident funds. They also lifted decade-long restrictions for foreign investment in the real estate sector, crucial to propping up the economy.

"Although August existing home transactions are still this year's second-highest in Beijing, the volume has shown a downward tendency after a peak in July," Century 21 said, adding that suburban districts were suffering more as buyers were mainly upgrading their homes.

It also said some buyers were holding out for better opportunities, while others faced curbs from new restrictions imposed in the popular Tongzhou district, where the municipal government plans to move some of its functions from the city centre.

In Shanghai, buyers decided to wait as better homes had been taken up, as seen in the strong transactions in the previous four months. However, sales still remained above the 34,000-unit level for the fifth consecutive month.

"Divergence is very clear. Upgrading demand is now moving from the city centre to new town areas," Century 21 said. "The deepening stock market rout has clouded the housing market's performance in golden September, the mid to high-end markets will be more affected."

The stock market has dropped about 40 per cent from its mid-June peak.