Turning point in sight for ailing housing sector after credit easing

A customer checks out models of housing projects at a real estate firm in Yichang, Hubei province. Residential property sales in the first nine months of the year slumped 10.8 percent year-on-year, the largest fall since April 2012. [Provided to China Daily]

Property sales and investment activity fell to fresh lows last month, but stimulus measures from the central bank have given rise to hopes that the worst will soon be over.

The National Bureau of Statistics said on Tuesday that residential property sales in the first nine months of the year slumped 10.8 percent year-on-year, the largest fall since April 2012. Investment growth in the same period was just 12.5 percent, tying the figure for August 2009, when the world was in the grips of the financial crisis.

With house price declines spreading to a record number of cities and new construction tumbling, the government took aim at reversing the housing slowdown in September, cutting mortgage rates for some homebuyers for the first time since the global financial crisis.

Developers said that move might have marked the end of the downturn because it changed buyers' expectations.

Home sales in October seemed to bear that out. The China Index Academy, a private research institution, said that from Oct 13 to 19, sales rose week-on-week in 34 cities. Those cities represent 83 percent of all the cities it monitors.

Total sales in the 41 cities it monitors rose 20 percent over the previous week, it said.

First-tier cities posted bigger rises - for example, Beijing had the largest gain of 134 percent.

Data from another private institution, Centaline Group, confirmed the trend.

"The market kept warming up. After the National Day holidays, sales in 54 cities had risen for three consecutive weeks," said Zhang Dawei, chief analyst with the group.

After the central bank's credit easing on Sept 30, three ministries on Oct 13 unveiled a policy that scrapped some fees for homebuyers who use their housing provident funds to buy a residence.

These measures gave new confidence to the market.

Developers have seized the opportunity to roll out more units for sale, and the increased supply helped boost transactions.

In Beijing, 3,879 new apartments were offered from Oct 13 to 19, a nearly six-fold surge from the previous week, according to Yahao Real Estate Service Corp.

If history offers any clue, the downturn might be nearly over.

The current home sales decline has lasted for nine months, while the last such streak lasted for seven months (January-July 2012). Prior to that, there was a decline of eight months from May to December 2008.

Not everyone is convinced that the sector has turned a corner. Wang Tao, head of China economics research at UBS AG, said that although the People's Bank of China has relaxed property lending policies and encouraged banks to increase credit support for the property sector, the weakest part of China's economy is still the property sector.

"We think such policies can mitigate but not reverse the property sector's structural downshift, and we expect a further slowdown in construction from the fourth quarter onwards," she said.