The year-long housing slump in China may have run its course as a private survey of home prices across 100 cities saw price growth jump back into positive territory in May.
Average home prices nationwide increased by 0.45 percent in May compared to June, according to the research by China Index Academy, a unit of online real estate platform Soufun. In China’s largest cities the rise in prices was still more pronounced, with rates for newly sold housing climbing an average of nearly one percent in the country’s top 10 urban areas.
The rise in prices appears to show that government moves to revive the housing sector, including interest rate cuts and removal of purchase restrictions, have succeeded in bringing buyers back into the market.
Policy Changes Start to Have an Impact
The increase revealed in this month’s figures appears to confirm a rebound that started earlier this year and has been driven by government measures aimed at ending last year’s housing slump.
Since November last year the People’s Bank of China has cut benchmark interest rates three times, most recently in early May, in an effort to spur lending.
In measures aimed more directly at the housing sector, at the end of March the government cut down-payment requirements for current homeowners who wish to buy additional units, reduced some taxes on housing transactions, and also tweaked lending rules to encourage more mortgage loans.
The market was quick to react to these measures last month, with the Academy’s index showing the rate in fall in China’s home prices decreasing to just 0.1 percent across the 100 cities it surveys and prices rapidly heading north in the country’s largest cities.
Prices Still Falling 52 Cities
Despite the nationwide index moving into positive territory, the Academy’s numbers indicate that the market continues to drop in many areas.
In 52 of the 100 cities prices still fell last month, with rates climbing in 48. However, the number of urban areas reporting growth was greater than in April when only 39 cities saw prices rise.
The top four cities for growth were all in southern China’s Guangdong province, led by Jiangmen with a jump of 3.84 percent, Shantou with a 3.58 percent rise, Shenzhen with 2.21 percent growth and Maoming with a 2.11 percent increase.
More Growth in June But Not So Hot in the Summer
Looking forward, China appears to be intent on driving still more growth in the housing sector. Just this week the country’s capital announced that Beijing residents buying first homes will only need to make a 20 percent downpayment on home purchases, regardless of size. Prior policies had required buyers of units over 90 square metres in Beijing to put down 30 percent. The country’s monetary authorities are also expected to continue their efforts to ensure ample credit for home buyers.
While developers are still facing a large overhand of unsold housing, at least in the country’s first-tier cities, home builders still appear confident. In land sales in Shanghai, Guangzhou and other locations this week developers stage prolonged battles for new sites, with prices in Shanghai setting new records for the year.
With confidence returning to the market, further growth in prices should be expected in June, although the traditionally slower summer months could push the market back into negative territory at least temporarily.
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