China Property Market

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Property cannot be discussed in one broad category. Even in Singapore, while we are seeing general softening prices, the prices of certain niches is defying gravity. (And with good reason too.) Much like a bullish stock market at an all time high, even if most stocks are no longer attractive in terms of valuation, there will be some exceptions, even though these exceptions will be much harder to spot.
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This seconds what Big Toe said. Some developer still able to raise selling price despite weak sentiment.

DBS Group, 14 May 2015

Riding on a buoyant upgrader market

Contracted sales came in faster than expected with YTD
sales target hit rate better than peers at 25%

Target to lock in Rmb10bn sales by end-May, as the
recent loosening has unleashed upgrader demand in Tier
1/2 cities.

Management has raised ASPs in recent launches in
Shanghai and Nanjing with strong demand
Upgrade to BUY with new TP at S$1.49

Strong sales pick-up since Mar is likely to continue in May/June.
Yanlord has achieved over Rmb1bn sales in Mar/Apr and locked in
Rmb4.4bn in 4M15 (+54% y-o-y and represents 25% of sales target).
Sales momentum remained strong in May with c.Rmb900m sales
locked in during 1W15. There is another Rmb3.7bn subscribed sales
outstanding (as in first week of May) to be contracted in coming
months.

Better chance to hit full year target after recent launches in Shanghai.
It may be able to hit Rmb10bn subscription sales by end-May,
accounting for 55% of its full year sales target. Its sales progress is
better than our expectation, benefiting from the policy loosening
since end Mar. The company also plans to raise ASP in recent
launches in Shanghai and Nanjing due to strong response to
prelaunch marketing which might help margins recovery.

1Q15 results declined y-o-y with 2%/8% earnings and revenue lockin
due to back-end loaded delivery schedule. Core earnings dropped
by 94% y-o-y to Rmb19m, locking in 2.1% of our full-year estimates
(vs. 16% lock-in in 1Q14). GP margin was 42.3%, higher than our
full-year estimate due to the planned delivery of high-margin projects
in this quarter. No dividend was declared for 1Q, as usual. Net
gearing remained largely flat from end-14 at 46%. Yanlord had
Rmb12.5bn unrecognised sales outstanding as at end-Mar. As 70%
of full-year delivery is planned in 4Q, we expect poor quarterly results
to come in 2Q and 3Q.

Upgrade to BUY on better sales outlook. Yanlord is trading at
S$1.165, 42% discount to NAV, 11.8x FY15 PE and 0.6x PB. It
underperformed China property peers by 27% YTD. Due to
improving outlook for the sector and better-than-expected sales, we
believe the company’s share price may be able to catch up. Upgrade
to BUY, with new TP of S$1.49 based on 15x FY15PE, benchmarked
to its 2012 peak PE.
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House prices suggest end to downturn
By Cherry Cao | May 19, 2015, Tuesday | Print Edition

MORE Chinese cities reported house price increases in April, adding to hopes that a property downturn which is weighing heavily on the economy is beginning to bottom out.

Increases in new home prices were recorded in 18 cities last month, compared to 12 in March. Prices remained unchanged in four and dropped in the other 48, compared to eight and 50 in March, the National Bureau of Statistics, which monitors prices in 70 major cities, said yesterday.

But analysts said that any recovery will take some time given a huge inventory of unsold homes, and said the property sector remains the biggest risk to the nation’s economy, which looks set for its worst year in 25 years, Reuters reported.

That will keep pressure on policy-makers to roll out more interest rate cuts and other stimulus measures later this year to boost activity, it said.

“Nationwide, prices of new homes climbed an average 0.3 percent in April as buying momentum continued to rebound amid a couple of reasons including loosening mortgage policies as well as a high-season impact,” said Liu Jianwei, a senior statistician at the bureau. “However, price increases were mainly confined to first-tier and a limited number of second-tier cities whereas the rest still suffered declines.”

Shenzhen continued to lead gainers among the country’s four first-tier cities with a month-on-month increase of 1.8 percent, followed by Beijing, Shanghai and Guangzhou, where new home prices climbed 0.8 percent, 0.7 percent and 0.4 percent, respectively, from March.

“First-tier cities continued to have some of the lowest unsold inventory levels with relation to recent transaction volumes,” said Chester Zhang, associate director at Savills China research.

“While they keep luring new business establishment or expansion supporting job creation, migration and wage growth, they are also attracting wealth from the rest of the country, which jointly supports house prices.”

In the existing home market, 28 cities recorded price increases from a month earlier, compared to 12 in March. Eight cities saw prices remain flat while another 34 suffered setbacks, compared to 10 and 48, respectively, in the previous month, the bureau said.

Shenzhen was also the top gainer with a monthly increase of 2.4 percent. In Beijing, Guangzhou and Shanghai, prices rose 2.1 percent, 1 percent and 0.6 percent, respectively.

On an annual basis, however, prices dropped in all cities except Shenzhen, where a 0.7 percent annual rise was recorded for new homes and a 2.8 percent gain for existing houses.

Average new home prices in the 70 cities dropped 6.1 percent last month compared to a year ago, the same rate of decline as in March, according to Reuters.
Real Estate
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Buy a flat, get a Porsche as China developers rush to sell
Date
June 19, 2015 - 12:33AM


Hopson Development Holdings in May offered a free Porsche or discounts of as much as 11 per cent to the first 30 buyers of apartments in a complex in southern China. Photo: Glenn Hunt

China's debt-riddled developers are turning to incentives like luxury cars as they rush to shed an inventory of unsold homes about seven times the size of Manhattan.

Hopson Development Holdings in May offered a free Porsche or discounts of as much as 11 per cent to the first 30 buyers of apartments in a complex in southern China. Evergrande Real Estate Group is letting homebuyers cancel purchases and get all their money back any time before they move into their flats.

Offering eye-popping incentives lets developers avoid using outright discounts that could alienate previous buyers of flats in a project.
Offering eye-popping incentives lets developers avoid using outright discounts that could alienate previous buyers of flats in a project. Photo: Getty Images
Such offers underscore the urgency among developers as they seize on a nascent rebound in sales and prices to generate cash and reduce record debt. Whether the recovery will gain traction is far from clear: While sales across the country jumped 32 per cent in May from a year earlier, construction and property investment remain subdued.

"By taking this opportunity of a mild improvement in sentiment, developers are trying to sell quickly to get more liquidity," said Kaven Tsang, a Hong Kong-based senior analyst at Moody's Investors Service.

Generous incentives to lure buyers are common in China, however the wobbly state of developers' finances is adding to the urgency to clear inventories of unsold homes that stand at a three-year high of 430 square kilometers (166 square miles).

Chinese property is surging. <i>Illustration: Simon Bosch</i>
Chinese property is surging. Illustration: Simon Bosch
Reversing course
Among 25 major Chinese developers tracked by Bloomberg Intelligence, only two generated positive cash flow from operations and investment in 2014. Meanwhile, their combined net debt jumped to a record 919 billion yuan ($148 billion).

"Developers cite clearing inventory as their key focus in 2015 because of falling margins and negative operating cash flows," Morgan Stanley analysts led by Hong Kong-based John Lam wrote in a May 19 note.

After falling sales and prices put pressure on developers, China's government started reversing course last year and eased some property curbs, igniting a recovery. Official home-price data on Thursday showed prices fell in fewer cities in May than in the previous month.

Cash flows at developers will probably improve slightly this year, supported by faster bank mortgage approvals after China's monetary easing, said RHB OSK Securities Hong Kong analyst Toni Ho. If sales gains prove sustainable, companies might consider accelerating land purchases, he said.

No conviction
Developers bought 31 per cent less land in the first five months of the year and new construction starts slumped 16 per cent, suggesting they aren't convinced about the strength of the recovery. Builders are also holding off raising prices, said Yang Kewei, an analyst at property data and consulting firm China Real Estate Information Corp.

"Some offer small discounts, some cancel earlier discounts, but the top priority for all still is destocking," he said.

Evergrande, which targets more contracted sales for this year than any other listed Chinese developer, in April said buyers across the country can get their money back without giving a reason at any time before they take possession of their homes.

Country Garden Holdings Co. allowed buyers to defer down payments until a month after they sign purchase agreements. To promote the incentive, Country Garden asked all its employees to market the offer on their personal WeChat accounts, a popular messaging service. Three calls to the company's public relations office went unanswered.

Purple dragon
Within three hours of Hopson inviting subscriptions on May 16 and enticing buyers with Porsches and discounts at its Purple Dragon complex in Guangzhou, the developer sold 300 million yuan of apartments under construction, according to a marketing manager who only gave his surname as Qiu.

Hopson's net debt-to-equity ratio was 75.7 per cent at the end of 2014, the highest in a decade. When counting perpetual securities as debt rather than equity, Evergrande's net debt was almost three times its equity on Dec. 31, according to Bloomberg Intelligence.

Offering eye-popping incentives lets developers avoid using outright discounts that could alienate previous buyers of flats in a project.

"These promotions can be of significant value and could shave 10 per cent or more off the effective cost of a new home even if the price is unchanged," said Bloomberg Intelligence analyst Robert Fong. "In the past, price cuts have caused protests and sales disruptions by earlier buyers."

High inventory
Bringing down their inventories may take longer now than in 2013, the last time the property market was booming. The 5.2 billion square metres of projects under development at the end of last year was almost five times greater than housing sales of 1.1 billion square metres for 2014, according to the bureau of statistics.

The ratio of inventory to contracted sales, a gauge of how long it takes to digest existing unsold stock, will continue to decrease though will likely remain above the low levels seen in 2013, according to Moody's Tsang. The value of new-home sales jumped 26.6 per cent that year, before falling in 2014.

"Inventory across the country is still high, and pressure for developers still lingers," said Liu Yuan, a research director at Centaline Group in Shanghai.

Bloomberg
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China's home prices rise in May for first time in 13 months
Date
June 18, 2015 - 3:57PM

China still has big inventories of unsold homes. Photo: Bloomberg
New home prices in China rebounded nationwide for the first time in 13 months in May, suggesting a property downturn is bottoming out after a barrage of stimulus from the central bank and local governments since late last year.

Economists, however, warned that massive inventories of unsold homes could continue to drag on the world's second-largest economy well into next year, discouraging new investment and construction.

"Inventories in first-tier cities are back to healthy levels...but in third and fourth-tier cities it will take at least two more years," said Rosealea Yao, economist at Gavekal Dragonomics based in Beijing.

Average new home prices in China's 70 major cities climbed 0.2 per cent in May from April, the first rise since May 2014, according to Reuters calculations based on official data released on Thursday.

Weighed down by the cooling property market and sluggish demand at home and abroad, China's economic growth slowed to a six-year low of 7 per cent in the first quarter and recent data showed weakness persisted into the second quarter, putting more pressure on the government to step up policy stimulus.

Recovery still a way off
While signs of a stabilisation in prices will ease strains on the economy and help banks which are heavily exposed to the real estate market, analysts said a full-blown sectoral recovery was still a long way off.

Official data last week showed residential inventory in May was 21.9 per cent higher than a year ago.

Bloated inventories may result in a longer lag between sales and new housing starts than the six- to eight month-long gap previously seen. Hence, bottoming-out of new home prices is unlikely to lead to a recovery in property investment this year, economists said.

"Nine months of good sales growth may lead indicators to show a recovery in property investment, but any recovery will be more muted than what we saw in the past," said Louis Kuijs, Greater China chief economist for RBS.

China's central bank cut interest rates for the third time in six months in May to lower borrowing costs and re-energise the slackening economy. Mortgage restrictions were also eased.

The property industry accounted for around 12 per cent of China's economic output in the first quarter, but the sector's slump has hit demand for everything from steel and cement to appliances and furniture - industries that account for some 30 per cent of GDP.

Weakness persists
The price data also highlighted a growing divide between conditions in the biggest cities and smaller ones, suggesting unevenness in regional growth could become more pronounced.

Prices in all four top-tier cities rose on the month but those in most third-tier cities continued to fall.

Beijing, Shanghai and Guangzhou reported increases of 1.1 per cent, 2.2 per cent and 1.4 per cent, respectively, while prices in Shenzhen surged as much as 6.6 per cent, fuelling concerns that the southern city's market could be overheating.

On an annual basis, nationwide prices fell for the ninth consecutive month, decreasing 5.7 per cent but narrowing from a 6.1 per cent drop in April, the National Bureau of Statistics data showed,

While Beijing would need 13.4 months to clear all empty homes in the city, Haikou, the capital city of resort island Hainan, and Shengyang, the largest city in Northeast China, would need 48.8 and 28.8 months, respectively, according to property researcher CRIC.

Property investment growth slowed to 5.1 per cent in January to May from a year earlier, the slowest pace since 2009, while new construction slumped 16 per cent.
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Pre-owned home sector firm, prices head north
By Cherry Cao | July 4, 2015, Saturday |

SHANGHAI’S pre-owned property market stayed robust overall in June despite a slight easing in sales while prices headed north at a faster pace.

About 35,500 units of pre-owned properties were sold across the city last month, down 8.5 percent from May, Shanghai Deovolente Realty Co said in a report released yesterday. The sales, however, marked a 171 percent surge from the same period a year ago.

“The monthly transactions of existing properties remained above the 35,000-unit threshold for the third consecutive month, indicating robust sentiment among local buyers,” said Lu Qilin, a researcher at Deovolente.

“However, the drop in sales, though not so significant, might suggest the beginning of a cooling in the next couple of months which should be a natural correction, while July and August are also traditionally low season for property sales due to the hot weather.”

The strong overall sentiment was also reflected in the housing price.

The city’s existing housing index, which monitors month-on-month price changes, rose 2.14 percent, or 64 points, to 2,996 last month, a separate report released recently by the Shanghai Existing House Index Office showed. That accelerated from a 0.52 percent gain in May.

Citywide, the prices of pre-owned houses rose in 108 of the 130 areas tracked by the office and fell in eight. Prices were flat in the remaining 14, according to the report.


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Property sales is not so telling as there is excess inventory to sell, its the new investment into land sales which has been continuosly dropping of the past year that tells us that developers themselves are not so confident of the future.

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Jul 10 2015 at 4:28 PM Updated Jul 10 2015 at 7:54 PM

Inner Mongolia offers insight into China's wild ride

Highrise construction site in Taiyuan in north China's Shanxi province. AP
by Lisa Murray Angus Grigg

The past week has given a clear warning of the risks to China's 30-year economic miracle. Sharemarkets have collapsed then steadied. The iron ore price has dived. But for an insight into the width of problems now confronting China, travel deep in the country's interior to Jinhai Road.

This dusty street on the outskirts of Inner Mongolia's capital, Hohhot, is lined with more than 30 recently built or unfinished property developments. Our taxi driver tells us if we were to come here at night, there would be no lights on. "No one is living here," she says. "We have too many houses, who would want to buy any more."

Just four years ago the narrative was very different. This isolated city on China's arid northern plains, famous for its dairy cows and coal mines, was the nerve-centre of the country's fastest growing provincial economy.

It is such a frontier town that on the day AFR Weekend visited, a man rode past with a horse brandishing a rifle. Even here, the booming resources sector and property market saw growth average a stunning 17 per cent a year in the decade to 2011. But just like it was once the poster child for country's rapid development, the city now epitomises the rut in which China's economy has found itself.

Hohhot is such a frontier town that on the day AFR Weekend visited, a man rode past with a horse brandishing a rifle.
Hohhot is such a frontier town that on the day AFR Weekend visited, a man rode past with a horse brandishing a rifle. Olivia Martin-McGuire
While a rapid unravelling of the country's real estate sector now appears unlikely, as state-owned banks continue to rollover loans to developers, the Hohhot property market is faced with a long, slow grind out of trouble. This new reality is mirrored in numerous central and western cities across China and is one of the factors behind the so called "flash crash" in the iron ore price to below $US44 a tonne on Thursday – the price has since rallied back to $US49 a tonne.

While the likes of Hohhot's property market were once a major source of demand for steel and therefore iron ore, that is no longer the case and is unlikely to be for many years to come. Property investment in the city was growing at an annual rate of 35 per cent in 2011. Now it's in reverse falling 8 per cent in the first quarter of this year.

Equally, the Chinese property market is no longer the driver of growth it once was for the broader economy. In 2013 when the economy grew by 7.7 per cent the real estate sector contributed 1.8 percentage points to the overall growth number. Last year, as growth dipped to 7.4 per cent, that contribution had dropped to 1 percentage point.

This year property's contribution is sure to slide further as growth slows to 7 per cent and possibly below. The weak outlook should be confirmed on Wednesday when second quarter GDP numbers are released. For policymakers in Beijing the scenario was relatively manageable, until the government-inflated sharemarket boom came to a nasty halt this week. While the government engineered a face-saving rally on Thursday and Friday, after imposing emergence measures to boost stock purchases and limit selling, the sharemarket correction has further complicated the picture for the property market, iron ore and the broader economy.

ATTACKS FROM TWO FRONTS

It means Beijing is now fighting on two fronts – property and the sharemarket as it battles to avert a sharp structural slowdown in the economy. Kevin Yeoh, the managing director for Asia at J Capital Research in Hong Kong, has a unique perspective on the nexus between iron ore, the sharemarket and the real economy on show in Hohhot. He has previously managed a margin lending portfolio and has worked as fund manager investing across Chinese sharemarkets.

"The big difference between now and China's sharemarket crash in 2008 is margin lending," he says via phone. "That is the really toxic aspect to this boom."

Yeoh's concern is that Chinese-listed companies have pledged their own stock as collateral for bank loans, which in many cases have been used to punt on the sharemarket or commodities. That means they are being hit with margin calls as their own stock prices and the broader market has declined. This is reason why some 1330 companies or half of all mainland-listed shares have been suspended from trading this week.

"The issue now is that they may need to sell quality collateral [assets] to cover their losses and repay the bank loans," he says. "This is the daisy chain effect which can then reach into the real economy."

But it's not just listed companies borrowing money to buy shares. Yeoh believes trading companies, real estate developers and manufactures have also been borrowing money to buy shares in an effort to bolster sluggish returns in the core business. "They may need to sell real estate or commodities to cover their loans," he says.

Yet the real estate development and and related industries which are the core of many of these same companies are now struggling. Activity or the lack of it at the Xinyuan Properties sales office on the edge of Hohhot tells the story. One worker has kicked off her grey high heels and is sleeping on the couch. Her colleague Li Na explains the property market has declined steadily since 2012. "Last year, I could sell 40 apartments a month," says Li, who has a Liza Minnelli haircut and sparkly painted fingernails. "Now I would be lucky to sell five or six."

Down the road at the sales office for local developer Shengtang it's equally slow, despite the positive spin from the group's head of sales Tong Xiangli. Her company has completed 50 high-rise towers, as part of a development which is slated to eventually have a further 20 towers. She insists the units all sold well in pre-sales. But asked why no one appeared to be living in the area, she said more than half of the units sold were investment properties, places that people "might use some day".

That means there are no new developments under way in the city. "Every spring there are four or five big new developments," she says. "But this year there are none."

SEVEN YEARS OF SUPPLY

That's because Hohhot has one of the highest property inventories in China. There is 20 million square metres to be sold, according to Li Zongkun, vice-president marketing at local conglomerate Elion Goldway. The problem for this city of 3 million people is that last year, sales were less than 2 million square metres.
Mr Li reckons it will take some "seven years to digest this supply".

"The government had little control on development and too many players came into the market and tried to develop properties," says Li. Still, he is optimistic. "Now the government is taking measures to control new supply and the priority is to sell off the inventory. I think the market will stabilise this year."

Even if it does, with such a big supply overhang, there is unlikely to be much construction in Hohhot. While the property markets in Shenzhen, Beijing and Shanghai are showing some signs of picking up, places like Hohhot have a long road ahead. These weak markets are feeding through into weak steel demand and helping to drive a plunge in the iron ore price.

"Apart from the financial crisis, real estate investment has never been this low," David Wong, chief economist at developer Shui On Land, said at a recent presentation in Shanghai. "In 2008 there was an inventory of 100 million square metres now that has increased six times to 600 million square metres."

"We are in the middle of a major correction," he said. "As long as the inventory remains high, it will be very difficult for developers to want to invest. That means any recovery in the property market is likely to be L-shaped rather than V-shaped, he insists. "The T1 cities will rebound very quickly because of the continuing influx of labour and capital. But there is a wide disparity across China. Pockets of the economy are very close to recession."

THE 'R' WORD

That's a word rarely even contemplated in China over the past two decades and while there is no suggestion of an economy-wide recession the outlook for iron ore is challenging. Xu Xiangchun, the chief information officer at research group Mysteel, said the worst is not over for Australian iron ore producers due to weak demand from the property sector and government infrastructure projects.

"We haven't seen the bottom yet," he says. "The iron ore price will see a continuous fall this year and next. We might see some rebounds in between but the general trend is down."

Xu points to weak demand from the property sector and government infrastructure projects as the main reason, but the sharemarket is looming as a possible third factor. Leverage is the issue. The 10 per cent fall in the iron ore price on Wednesday night to $US44 a tonne was partly attributed to traders dumping cargos in a frantic effort to raise cash to cover margin loans.

Westpac strategist Robert Rennie said the link was too coincidental to be ruled out. "I do think there is something of a connection between the collapse in the iron ore price and the sudden fall of Chinese equities," he says via phone from Sydney. "I do think it could be related to traders running into trouble with their margin financing."

Official figures show outstanding margin loans have fallen 30 per cent to 1.4 trillion yuan since mid-June, which suggests a rapid de-leveraging is taking place.
But this does not take into account unofficial or off-market loans. "That is the real killer, as we don't know what the off-market leverage might be," says Yeoh from J Capital. Estimates suggest between 500 billion yuan ($108 billion) and 2 trillion yuan of additional margin lending has been extended through this so-called "grey channel". This will take longer to work through the system and partly explains the emergency actions taken by China's central government this week to stem falls on the Shanghai and Shenzhen markets. Much of the government's efforts have targeted margin finance.

On Wednesday the People's Bank of China, the central bank, said it would extend 260 billion yuan of funding to brokers providing margin lending. Then on Thursday the country's banking regulator said it would tolerate banks being more lenient on calling in margin loans. It also encouraged banks to roll over maturing margin loans and accept lower collateral. In a series of statements during the week government bodies indicated the sharemarket risks were controllable if they could prevent a further wave of selling triggered by margin loans gone bad.

If they are right then the overall effect of the sharemarket correction should be relatively small on the real economy. UBS figures show that equities only account for 20 per cent of the financial wealth held by Chinese households. This drops to around 12 per cent if property is included.

But the risks cannot be discounted entirely. "The government may be concerned that large and widespread investment losses could lead to a notable negative wealth effect which could weaken consumption, as well as grievances against the authorities," said UBS China economist Wang Tao. This is what investors will be looking out for over the coming months, as the Chinese government scrambles to stop any contagion into the real economy.
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Chinese home prices rise again

Home prices rose in 27 of 70 Chinese cities, with first-tier centres like Beijing (above) leading the rise. The government has relaxed tax rules and cut downpayments for second-home buyers. Its pro-growth policy and cuts to interest rates also boosted sales and market sentiment. PHOTO: REUTERS
Published
2 hours ago

Second increase in a row a sign that efforts to boost property sector are gaining traction

BEIJING • Chinese home prices rose for a second month in a row last month, on a monthly basis, indicating that government efforts to boost the struggling property sector have started to gain traction.

Average new home prices rose 0.4 per cent in June versus May, according to Reuters calculations from official data published yesterday. That was a faster gain than the 0.2 per cent rise in May, the first monthly rise since April last year.

Prices in 27 of the 70 cities recorded increases, with first-tier centres including Shenzhen and Shanghai leading a rebound. Prices were unchanged in 10.

The second month of rising prices is a sign of a bottoming out for one of the country's key sectors, and should ease fears of a sharp slowdown in China's economy.

Last Wednesday, China reported annual growth of 7 per cent in the second quarter of this year.

TOO MUCH SUPPLY

There are many Chinese cities sitting on a sizeable inventory of unsold homes. It's not easy for home prices to be up in those cities.

Mr Liu Yuan, head of research at property consultant Centaline in Shanghai.

A mild recovery in the market could be welcomed by the government as long as it does not turn into a swift rebound, which would risk rekindling property bubbles.

Mr Sheng Laiyun, spokesman for the National Bureau of Statistics (NBS), said last Wednesday that the property sector showed marked improvement in the second quarter, boding well for the broad economy.

Still, high inventories of unsold homes have weighed on most small cities, and developers have slowed the pace of construction, underscoring the unlikeliness of a quick recovery in the property market.

"There are many Chinese cities sitting on a sizeable inventory of unsold homes. It's not easy for home prices to be up in those cities," said Mr Liu Yuan, head of research at property consultant Centaline in Shanghai.

Official data last week showed China's unsold floor space totalled 657.4 million sq m at the end of last month, up 20.8 per cent from the same period a year ago.

The government has relaxed tax rules and cut downpayments for second-home buyers in the past few months. Its pro-growth policy, which included four cuts to benchmark interest rates since November, also helped boost property sales and change market sentiment.

With sales rebounding and home buyers turning more optimistic about the market, some developers have started to raise prices.

Prices in the wealthiest cities led the gains, but most third-tier cities still saw prices fall, highlighting a growing divide in the market.

"There are relatively strong housing demand and transactions in the first-tier cities, where home price gains are much higher than those in second- and third-tier cities," said Mr Liu Jianwei, a senior statistician at the NBS.

The southern city of Shenzhen was the top performer, recording the third consecutive month of rebound. Shanghai's prices also swung into positive year-on-year growth. Shenyang and Guiyang also reversed declines.

While home sales jumped 13 per cent in the first half of this year, compared with a 9 per cent decrease a year earlier, investment in property development slowed to 4.6 per cent from 14.1 per cent.

"The trend of polarisation is still evident among different cities," the statistics bureau said in a statement, adding that demand was robust in first-tier cities while smaller centres struggled.

REUTERS,BLOOMBERG
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Robust momentum in Shanghai's housing market
By Cherry Cao | August 3, 2015, Monday | Online Edition

ROBUST momentum prevailed in Shanghai's new housing market for another month despite the hot weather, with average price hitting a record again, latest industry data suggest.

The area of new residential properties sold, excluding government-subsidized affordable housing, fell 9 percent from June to 1.34 million square meters in July, Shanghai Uwin Real Estate Information Services Co said in a latest report. That, however, represented a year-on-year surge of 92 percent.

These new homes were sold for an average 34,639 yuan (US$5,568) per square meter, an increase of 0.9 percent from June and a rise of 32 percent from same period a year ago.

"Despite the single-digit month-over-month drop, the transaction volume was still very high for this time of the year, which is usually a sluggish season for property sales," said Huang Zhijian, chief analyst at Uwin. "However, we should also notice that the inventory of new homes still remained at a high level, meaning that real estate developers should be somewhat cautious despite the red-hot market sentiment."

As of Monday, local stock of new residential properties available for sale stood at over 11.94 million square meters, according to www.fangdi.com, the city's official real estate website.

Citywide, a housing development in Beicai, Pudong New Area, attracted the most buyers last month with 291 apartments there being sold for an average 38,113 yuan per square, according to a separate report released by Shanghai Deovolente Realty Co.

Among the city's 10 best-selling projects, seven cost more than 30,000 yuan per square meter, indicating strong sentiment in the medium- to high-end segment, Deovolente data showed.

On the supply side, about 968,000 square meters of new houses were released to the local market last month, an increase of 14.7 percent from June.
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