Data released on Friday showed home prices continuing to drop, with home prices nationwide reaching a 16-month low.
In the figures published on Friday by China Real Estate Index System (a division of Soufun.com, China’s biggest real estate website) out of 100 cities surveyed, 73 reported declining prices, while 26 posted gains, and one reported no change. On average, rates dropped 0.31 percent from April to RMB 8,684 per square meter down 1.53 percent from a year earlier.
This marked the second month in a row that prices had fallen on a year-on-year basis, with average prices having declined 0.71 percent during April 2012 compared to April 2011.
The Soufun data, which resulted from a survey of real estate agents and developers, also indicated that average May home prices in China’s 10 biggest cities (including Beijing and Shanghai) dropped 3.2 percent from the same period in 2011. On a month-by-month basis values in these same cities went down 0.5 percent compared to April, an even more precipitous price drop than the decline of 0.3 percent from March to April.
Overall, however, there appeared to be a slowing in the rate of price decreases nationwide. The survey showed that prices across the country declined 0.31 percent compared to April, where April had shown a 0.34 percent drop from March.
One explanation for the easing of price decreases can be seen in the transaction volume data from CRIC (part of eHouse) for the last week in May. These figures show that the amount of home sales in terms of floor area appears to be rebounding. In Shenzhen, the number of square metres of housing sold during the week rose 39.6 percent compared to a week earlier, reaching 107,200 square meters. Shanghai also reported a 27.1 percent increase in the number of square metres sold compared to the previous week, with sales reaching 185,400 square metres.
In another survey released on Friday, Deovolente Realty Co found that purchases of new homes in Shanghai, excluding government-funded affordable housing, rose 32 percent from April to 806,000 square meters last month, the highest since June 2011.
The increase in housing sales follows soon after the government decided to relax lending earlier last month, with a decrease in required reserve ratios for banks having taken effect on May 18th.
Some observers are also detecting signs of a relaxation in the curbs on residential housing sales as last month the housing ministry endorsed a plan by the city Yangzhou in Jiangsu province to subsidise purchases of newly built homes with finished interiors. Also, the central government announced recently that it would relax its residency regulations which raises the possibility that communities could enlarge their pool of eligible local home buyers.