Home sales in major Chinese cities are ticking up this month, as a series of recent stimulus measures have boosted homebuyer sentiment.
The early signs of recovery in the housing market in big cities offer some relief as Chinese authorities seek to stimulate the world’s second-largest economy by stabilizing the property market.
The struggling property sector has been a major drag on China’s economy over the past few years, with cash-strapped developers and high inventories of unsold homes and unfinished projects.
In a bid to prop up the housing market, Chinese authorities in late September ordered to cut mortgage rates for existing loans, lower down payment ratios and relax purchase restrictions.
The cities of Beijing, Shanghai, Guangzhou and Shenzhen introduced their versions of stimulus measures for local housing markets just before the National Day holiday.
This came in late September, when a meeting of the Political Bureau of the Communist Party of China Central Committee underlined the need for efforts to reverse the real estate market downturn and stabilize the market.
The stimulus package has proven effective in boosting homebuyer sentiment in big cities quickly. This month, many housing sales centers in major cities are packed with clients as many once hesitant homebuyers are again jumping into the market.
On Sunday, 744 customers signed up to vie for 332 flats in a Shenzhen housing project, and all the flats were sold out in three and a half hours, a rarity before the stimulus package was announced.
The market rebound started with the week-long National Day holiday from October 1 to 7. According to Leyoujia, a housing agency in Shenzhen, the conversion rate of home buyers for new homes – the ratio of finalized deals to all customers who have visited a real estate project – jumped to 12 percent from 2 percent.
Liu Xiaofei, a sales manager at property developer LVGEM Group in Shenzhen, said the new stimulus has greatly boosted the market and confidence, helping to increase the conversion rate and shorten the decision-making process.
During the holiday, buyers in Shenzhen signed initial purchase contracts for 1,841 new homes, up 664.1 percent from a year earlier, local data showed. Meanwhile, homebuyers signed contracts for 2,316 second-hand homes last week, a weekly transaction record in nearly three years, according to housing agency Leyoujia.
Liu believes the housing market is stabilizing after hitting a trough, but more measures are needed to further boost consumer confidence.
In Guangzhou, capital of south China’s Guangdong Province, homebuyers had signed initial purchase contracts for 6,687 new homes, up 137 percent year on year, after home purchase restrictions were lifted on September 29, the Guangzhou Municipal Housing and Urban-Rural Development Bureau said on October 12. The bureau attributed the strong growth to policy incentives and sales promotions by developers.
In Shanghai, 1,334 second-hand homes were traded on Sunday, the daily record in more than a year, according to the website of the Shanghai Real Estate Trading Center.
The daily number of more than 1,000 shows that second-hand home transactions are very active in Shanghai, said Lu Wenxi, an analyst with real estate agency Centaline Property.
A Shanghai homebuyer, surnamed Zhang, was a beneficiary of the stimulus. The down payment ratio for second-home purchases was lowered to 25 percent, allowing him to improve his living conditions much sooner, Zhang said.
The market also heats up in Beijing. The number of second-hand home transactions here nearly doubled from the previous month and surged more than 150 percent year on year from October 1 to 15, according to Leng Hui, an analyst with the research institute of Lianjia, a major second-home realtor.
Li Yifeng, deputy research chief at China Index Academy, said Beijing, Shanghai and Shenzhen still have room to loosen housing policies to further stabilize the property market in the future.
Economic fundamentals are key to stabilizing the property sector and expectations, and if the economic recovery accelerates in the fourth quarter with stimulus measures, the property market in key cities could stabilize, and a similar result could even be expected for the market nationwide, Li said.