China's smaller cities have modest rebound in March as homebuyers return, snapping a four-month deceleration in prices

The prices of China's new homes snapped their four-month consecutive deceleration in March, recording a modest rebound last month as the easing of price-control regulations among the country's far-flung smaller cities fuelled demand and prices.

Prices advanced by 0.61 per cent in March, from February, at a faster monthly pace than the 0.53 per cent gain a month earlier, according to a Bloomberg calculation using National Bureau of Statistics data. New abodes cost more in March in 65 cities out of 70 urban centres, a big jump from the 57 that reported higher prices in February, the data showed.

"The upbeat sentiment in bigger cities has spilled to third-tier cities," said Yan Yuejin, a research director with E-house China R&D Institute. "Home prices in these cities are much lower than those in biggest cities so it is easier to record bigger increase rate."

A so-called reflation is taking place among China's third-tier cities, as asset prices pick up momentum, registering 0.7 per cent month-on-month increase in March, compared with 0.4 per cent in February, according to the data. Dandong, a city of about 3 million residents in north-eastern China's border with North Korea, saw property prices rising 1.9 per cent last month, as investors rushed to buy property in the third-tier city on hope of a detente in the US-North Korea nuclear crisis.

Chinese banks had also been pumping funds into the economy to prop up economic growth, bolster consumption and keep unemployment at bay. State banks pumped 1.69 trillion yuan (US$251 billion) of credits into the banking system last months, beating market estimates by a large margin.

"Backed by the loosening of credit and the stronger market outlook, the property market in the first- and second-tier cities staged a rebound in March," said Chen Tiancheng, a property analyst with Tianfeng Securities. "Land market in these cities warmed up again, which suggest developers' improved appetite and outlook."

The national figures conceal regional house price variations, even among first-tier cities. New home prices in Shanghai and Shenzhen retreated 0.1 and 0.3 per cent over the previous month, while Beijing and Guangzhou rose 0.4 and 0.8 per cent respectively.

Beijing's first-quarter new home sales jumped by 133 per cent from a year ago while the transactions of second-hand homes also rose 9.3 per cent, but prices remain stable.

"The uptick in sales volume has not translate to higher selling prices," said Li Xiang, senior research manager at Savills. "This is because many projects are sold at prices capped by the government, and the supply is big. We do not expect an upswing in prices this year."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

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