SHANGHAI—China’s housing prices and sales are showing sustained signs of improvement so far this year, but sluggish investment in real-estate development suggest that an overall turnaround in the property market will take time.
The average price of new homes in 70 Chinese cities rose for the fifth straight month in September from the month before, as the pickup in demand for homes that started in spring has largely maintained its momentum despite a broader economic slowdown and volatile financial markets.
Home prices rose by 0.20% in September from August, following a 0.17% gain in August and a 0.15% rise in July, according to Wall Street Journal calculations from data released Friday. Home prices first showed a turnaround in May, after a yearlong slump.
Compared with a year earlier, the decline in home prices continued to narrow in September, falling 2.0% from August’s 3.2% drop. The index first showed a year-over-year fall in September last year.
Policy makers have been loosening restrictions on home purchases and lowering interest rates since late last year, which have helped to fuel housing demand. In its latest move in late September, the central bank reduced the minimum down payment for first time home buyers to 25% from 30% in most cities.
“Home sales remained resilient and we expect continuous sales improvement in the fourth quarter,” said Barclays analysts in a note.
Earlier this month, at property showrooms in Qingdao, a coastal city in northeast China, home buyers peered at real-estate models and clutched marketing literature.
“Prices seem to be holding steady and I think it’s a good time to buy an apartment,” said Wang Jian, a manager at a renovation company in Qingdao, who said she was looking for a second home.
While property sales and prices have improved this year, property developers are cautious about taking on new projects amid a building glut. Investment in real-estate development grew by a mere 2.6% in the first nine months this year, the slowest rate of increase since the start of 2009.
“While it is still too early to expect any margin turnaround, developers’ sales growth and cash flow positions are undoubtedly improving,” said the note from Barclays.
The property market contributes nearly a fifth of activity in China’s economy, according to Moody’s Analytics.
The improvement in prices is also spilling out to more cities. Private new-home prices in 39 of the 70 cities surveyed rose from the previous month in September, up from 35 in August. On a year-on-year basis, home prices gained in 12 of the cities last month, compared with nine cities in August.
Home prices in so-called first-tier cities gained the most. Shenzhen led the gains with a 37.6% year-over-year jump in September, followed by Shanghai’s 8.3% and 4.7% in Beijing.
Nationwide housing sales rose 18.2% on-year to 4.8 trillion yuan in the first three quarters of the year and gained 8.2% on-year in terms of volume, according to data earlier this week.
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This story originally appeared on The Wall Street Journal.