The average home price in China's 100 major cities edged up 0.05 percent in June from May, up for the first time in 10 months and manufacturing indicators beat forecasts.
According to a survey of property developers and real-estate firms, the average price of housing in 100 major Chinese cities rose in June from the previous month, after nine straight months of decline.
The survey follows other signs that the Chinese market has bottomed out, including a pickup in real-estate investment in May and a far shallower decline in property sales during that month compared with April.
"Property sales have been rebounding since March as the government fine-tunes monetary policy and some property developers stop offering discounts and even raise prices of new homes," CREIS, a consultancy affiliated with China's largest online real estate company Soufun Holdings, said in a statement.
But home prices in the 100 cities were still down in June from a year earlier, by 1.9 percent on average to 8,688 yuan ($1,400) per square meter, CREIS said.
These trends will take time to work through before inventories return to a normal level - probably at least a year, possibly more. In this environment, small and medium-sized developers - and large leveraged players - will continue to experience tough operating conditions.
Weaker construction will hit GDP. Housing investment accounts for some 8 percent of GDP and has wide-ranging secondary impacts on commodity demand and the products that fill living rooms and kitchens. It will continue to drag on growth.
The 21st Century Business Herald later reported that the Zhengzhou City Finance Office denied such a policy was introduced (suggesting that the central government intervened). We do not expect overall purchase restrictions to be relaxed before year-end, but the central government is likely to tolerate measured, quiet easing by local governments that is focused on "real" (rather than speculative) demand. Higher sales volumes mean more cash flow for developers.
