HONG KONG -- China's real estate market seems to have reached a bottom, with the decline in housing prices coming to a halt in many cities and sales soaring in Shenzhen and other big cities.
The National Bureau of Statistics released May housing price data for 70 major cities Thursday. The number of cities in which new-home prices, excluding low-income housing, fell on the month declined for a third straight month. It had reached 66 in February but dropped to 50 in March, 48 in April and 43 in May. Meanwhile, prices increased in 20 cities in May, up by 2 from April.
Previously released real estate data also pointed to improvement. Housing prices for the January-May period, released June 11, showed home sales up 5.1% from a year earlier, an improvement from the 2.2% drop for January-April. This marked the end of an uninterrupted decline that began at the start of 2014. New-housing inventories in 35 cities shrank for three straight months through the end of May, according to a real estate research firm.
The Chinese government lowered down-payment requirements for home loans in late March, reduced the reserve requirement ratio for banks on April 20, and cut interest rates for the third time since autumn 2014 on May 10. These measures have helped rekindle interest in home buying, mainly in big cities. Housing prices in the Nanshan district of Shenzhen jumped 85% on the year in May amid bidding wars.
Prices in "Shenzhen, where the supply-demand balance is tight, tend to move quickly with market prices, so it's a sign that prices will start to grow in other cities, particularly big cities," said Huang Yongxi, a representative at Japanese brokerage Toyo Securities' Shanghai office.
The bulls are gaining ground. With the market rebounding from last year's weakness and monetary easing playing a role, "China's real estate market will recover in the latter half of this year," a Bank of America Merrill Lynch researcher told a seminar in Hong Kong Wednesday. The analyst expects housing sales to increase 5% in 2015 and sales and profit at listed companies to rise 10-15%.
A prediction by property mogul Ren Zhiqiang, former chairman of developer Hua Yuan Property, has attracted attention. He sees real estate prices growing sharply this year in 10 cities, including Tianjin, Chongqing, Jinan and Wuhan.
The Chinese government reiterated Wednesday its policy of encouraging increased real estate investment and reasonable home-buying. Hua Yuan's stock went limit-up in Shanghai Thursday with a 10% jump. In Hong Kong, China Resources Land and China Overseas Land & Investment both advanced sharply. Market players anticipate rallies in other stocks, such as Beijing Capital Development.
New-home prices declined on the year in 69 of 70 cities in May. With many outlying cities suffering from a supply glut, it will take time for the benefits of government stimulus to spread throughout the country. Growth in property development investment slumped to the lowest level in 61 months in the January-May period.
But a steadily growing number of analysts view the current stock rally and bottoming out of property prices as supporting the real economy. Individuals who made easy money on stocks are starting to move into the real estate market, with one person reportedly spending 60 million yuan ($9.66 million) on some 30 housing units in Beijing.