Prices are rising in more cities, more homes are selling, and even land sales have rebounded. If China weren’t still piling up more unsold homes the real estate market would look more encouraging than it has since the country’s property slump started more than one year ago.
New home prices still fell in 49 out of 70 cities surveyed by the National Bureau of Statistics, but that figure is a major improvement over last month, when 66 of the country’s largest communities saw housing prices decline.
Average prices of new homes, including subsidised housing, were down by just 0.03 percent compared to the first two months of 2015, and the value of sales while still falling, rebounded sharply to just -9.3 percent on a month to month basis, compared to January and February when sales fell at an alarming 15.8 percent.
China Housing Heat Map
Mingtiandi's interactive China housing heat map shows which markets are already rebounding and where home prices continue to slide.
Darker red means faster growth and pale pink places are still moving down quickly.
Government Stimulus Seems to Gain Traction
The improvement in China’s housing sales comes after the country’s government has taken a number of forceful measures in recent months to encourage lending and prop up a real estate sector that accounts for at least 15 percent of the nation’s GDP.
At the end of February China’s central bank cut interest rates on loans longer than five years by 25 basis points, less than four months after a 40 basis point cut late last year. At the end of March the government also lowered downpayment requirements for buyers of multiple homes and made it easier for residents to borrow against their government housing accounts.
And more measures to encourage home sales and rekindle growth appear to be on the way as China stares at its slowest GDP growth since the global financial crisis of 2009. On Sunday the government lowered the requirement on the amount of reserves that banks need to maintain, pumping an estimated RMB 1.2 trillion ($194 billion) into the money supply and more stimulus is expected.
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Table shows figures for new homes sale including subsidised housing.
Still Room for Improvement in China’s Housing Sector
Despite the monetary stimulus China’s home sales and March’s brighter picture, home sales were still down 9.1 percent in the first quarter compared to the same period last year, and year on year sales were still down by 7.8 percent.
Even after the increase in sales value during March and an accompanying improvement in volume of floor space sold, the bureau’s figures show that developer’s inventories of new homes continued to grow, reaching a record 428 million square metres by the end of the month, up 1.52 percent from the end of February.
Even among China’s powerhouse first-tier cities, only Shenzhen reported an increase in prices, while Shanghai prices leveled off and Beijing reported a drop of 14.6 percent compared to February and rates in Guangzhou were down by 11.3 percent.
With these challenges ahead it should still be some months before the overall market moves back into positive territory and summer months could still hold challenges for developers whose cashflow may already be stretched by more than a year of disappointing sales.