Caixin
Sep 16, 2010 12:27 PM

Cautiously, China's Home Market Goes for Gold

(Beijing) - Home shoppers sidelined by high expectations reached a new turning point in recent months: They stopped expecting prices for newly built homes to decline, and finally took the plunge.

Market data from various regions across the country suggest a bounceback for the real estate market, with sales and prices generally rising in the first week of September – the start of the Chinese property sector's traditional Golden September-Silver October sales period.

August sales figures from listed developers show their capital positions have improved significantly overall, based on higher transaction levels and cash inflow.

Major property developer Vanke reported a 149 percent jump in sales revenues year-on-year in August to about 12 billion yuan – a new one-month record for a developer in China.

R&F Properties said its sales climbed 45 percent in August, while the Poly Real Estate Group reported a 66 percent increase.

An analyst with Guotai Junan said the volume and price increases can be tied to moderate rise in new-home supply, pent-up demand among shoppers who had delayed purchases and were uncertain about the effects of regulatory measures, and vigorous demand for investment options among investors seeking to hedge against inflation.

Moreover, the analyst said, housing prices have generally stabilized after months of tumbling.

And with no signs of capital difficulty among developers, it's now unlikely that the drastic price-slashing seen after the global financial crisis began in 2008 will return.

But neither are there any signs that the government intends to loosen regulatory controls imposed earlier this year to discourage speculation. In fact, regulators have been signaling recently that such efforts would be strengthened.

That's a bad signal for the market, said analyst Ma Guangyuan. He said the policy environment has changed radically this year, making it impossible for real estate to stage the kind of thorough, dramatic recovery that stimulated the market in 2009.

Supply and Signals

The actual number of newly built homes offered for sale in July and August fell from market expectations, and industry forecasts said September's supply also would also be below expectations.

In Beijing, data from information provider Yahao Real Estate show that only 17 of 34 new projects on the city's list of properties ready for sale were actually rolled out in July.

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