Guangzhou sees 52% increase in purchases of new residences in May

A sales report for May published by China's largest real estate website has sounded an optimistic note on the country's under-pressure housing market.

The report, released on Tuesday by SouFun Holdings Ltd, suggests that after a long chill in new property sales, the majority of Chinese developers have recorded fresh peaks in May.

Potential homebuyers visit a housing exhibition in Hangzhou, Zhejiang province. Inelastic demand for homes has pushed up sales in some major cities across the country. [Photo/Xinhua]

The upbeat trend is expected to continue in June, said analysts, but prices are likely to remain largely static, they cautioned.

Sales in 34 out of 40 large cities monitored across the country have seen a month-on-month increase from April to May, according to the SouFun report.

New-build sales in Guangzhou saw the largest rise, at a hefty 52 percent. Large cities such as Beijing, Chengdu and Shenzhen all achieved a growth rate above 30 percent.

Combined sales in Beijing, Shanghai, Guangzhou and Shenzhen nearly doubled to 40,000, compared to 21,000 in April.

The latest property indicator for May echoes one made earlier by Centaline Property Agency Ltd, China's biggest real-estate brokerage, that suggested 30 cities it monitored saw a 28 percent year-on-year increase in floor space sold in newly built residential property, and a 20 percent May increase compared to April.

China Vanke Co Ltd, the country's largest property developer whose sales are often deemed a barometer of the country's property market, also recorded an increase in sales in May from April, as well as from a year earlier.

The company said its sales in May totaled 10.72 billion yuan ($1.68 billion) in value, a 19 percent increase from the 9.01 billion yuan of sales it reported in May 2011, and 44.1 percent higher than the 7.44 billion yuan it reported in April.

Market analysts said the ongoing warm-up in new home sales is largely a reflection of policy easing at the margins of the property market by Beijing and other local governments, out of a concern about slowing economic growth.

In February, commercial banks in Beijing started offering mortgages to first-time buyers at or below the central bank's benchmark rate, against rates of 5-10 percent higher in the second half of last year.

Beijing is one of more than 30 cities to have rolled out or fine-tuned policies in the property sector aimed at boosting the market since the second half of 2011, according to the leading business newspaper China Business Herald.

These policies have included: more favorable interest rates for first-time buyers, loosening of the upper limit for house buyers who use low-interest provident fund loans and transaction-related taxes and fees reduction.

Of the above cities monitored by SouFun, policies in only five cities, including Shanghai and Wuhu of Anhui province, have been canceled by the central government.

Last week, there were reports that Hunan province has rolled out further policies to encourage property sales, including lowering payment requirements for first-time buyers.

The Hunan government denied the claim this week.

"As seen from the current situation, if the local governments say they are not fine-tuning, it is unlikely that the central government will probe further," Xue Jianxiong, research director of CRIC China, was quoted by China Business Herald as saying.

Land grant fees are a major source of revenue for local governments.

But analysts also noted that the current increase in sales is more likely to have been prompted by marginal incentives such as mortgage lending discounts, rather than any drop in house prices.

Ge Ling, director of Centaline China Property Research, said the trimming of interest rates has encouraged some first-time buyers to accelerate their purchasing plans.

Analysts are optimistic that the current rise in sales is expected to continue in June, but added that there was little hope of any significant price cuts.

Statistics from China Real Estate Index System, a private data provider, showed that average housing prices in 100 large Chinese cities fell at a slower pace a month-on-month in May, slipping by 0.31 percent from April. The April figure slipped 0.34 percent from March.

"The previous promotional price of some house developers has already resulted in turnover increases. Now there is thin room for more reductions," added Zhang Dawei, an analyst with Centaline.

Hu Jinghui, vice-president of the property brokerage 5i5j Real Estate, suggested the fine-tuning policies will increase the inelastic demand of first-time buyers, and bring about a rise in June sales.

[email protected]