Housing sales in China bolstered as new home prices fall in October, index shows

New home prices fell month on month in most of mainland China’s 10 major cities tracked by the SCMP-Creda index, but sales improved for a second consecutive month, boding well for the rest of this year.

The average primary home price fell in eight cities last month from September. Beijing suffered the most, switching to a 9.68 per cent dive from the previous month’s gain of 7.16 per cent.

Other losers include Nanjing, Guangzhou, Shenzhen, Chongqing, Chengdu, Hangzhou and Tianjin.

Shanghai and Wuhan were the only two gainers, up 11.28 per cent and 0.45 per cent respectively.

Lower prices are boosting sales and helping ease the industry’s inventory level, as supply is also falling due to a slowdown in real estate investment, said Chen Sheng, dean of the China Real Estate Data Academy (Creda), partner of the South China Morning Post for the index.

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In year-on-year terms, Shenzhen outperformed last month with the average new home price gaining 53.3 per cent, followed by Shanghai with an annual rise of 20.4 per cent. Guangzhou was the only one in the 10 cities to suffer a decline of 1.76 per cent during the period.

“Transactions picked up in October, but polarisation between cities increased,” Chen added.

The latest reading showed combined transaction volume in the 10 cities rose 10.3 per cent last month, improving for a second straight month. However, Beijing, Chengdu and Hangzhou suffered a decline.

The gainers were led by Shenzhen with an increase of 34.2 per cent. However, a higher proportion of the transactions were completed by end-users, while sales in the high-end market shrank, driving down the average price.

“Such a trend [in Shenzhen] will continue in the next few months,” Chen said.

China’s government has relaxed policies since last year to stimulate housing demand, including six interest rate cuts. And analysts expect more to come, as the broader economy faces rising downside risks.

President Xi Jinping told a high-level economic meeting last week that the country needed to increase efforts to help developers sell down property inventories in order to foster sustainable development of the industry, which accounts directly for about 15 per cent of the world’s economy largest economy and affects more than 40 other sectors.

“The government’s latest down payment cut for first home buyers to 25 per cent [from the previous 30 per cent] will be implemented soon in various cities, easing cash requirements for buyers and driving them into the market,” Creda said. “The relaxation for borrowing from local governments’ housing provident funds will also boost confidence.”

Chengdu remained as the most affordable city among the 10 on the radar, with its average new home price declining 21 per cent in the first 10 months .