China Housing Market Shows Signs of Life

SHANGHAI—China’s housing sales showed signs of a turnaround in April, posting year-over-year growth for the first time since December 2013, as home buyers waded back into the market following recent policy easing measures by the central government. While sales picked up sharply, other metrics such as investment and construction starts in the all-important property sector continued to show weakness. China’s housing sales in the first four months fell 2.2% to 1.49 trillion yuan ($240.3 billion) from the same period a year earlier, marking an improvement from the 9.2% decline in the first quarter, according to the National Bureau of Statistics Wednesday. In April alone, housing sales rose 16.0% from a year earlier to 485.4 billion yuan, according to calculations by The Wall Street Journal based on the official data. “The market is turning the corner,” said Frank Chen, an executive director of property consultancy CBRE. Policy makers have been worried that a prolonged property downturn would make things worse for the Chinese economy, which grew at its slowest pace in six years in the first quarter and will likely post its worst full-year performance in more than two decades. On Sunday, the central bank cut benchmark interest rates for the third time in six months, a move that could help the emerging signs of improvement in housing demand. With the latest interest rate cut, the effective mortgage rate on loans of more than five years has dropped to 5.37% from 5.61%. Down payment requirements have already been eased for second home purchases and local governments have been rolling back some of their restrictions on home purchases. Policy makers are hoping such moves will convince people to buy a home. Alex Huang, a production engineer in Shanghai, is one such potential buyer who just might be convinced to take the plunge. “I’m looking for an apartment near my office in Minhang district, and I’m more confident in buying a place in Shanghai rather than in my hometown, where prices are still falling,” said the 28-year-old Mr. Huang. He believes housing prices are more likely to appreciate in Shanghai than in Changsha—where he was born—a city around 680 miles west of Shanghai. Average home prices in major Chinese cities are stabilizing, analysts said, and the sales momentum has picked up in cities such as Beijing, Shanghai and Shenzhen, where developers are still planning new projects. However, the situation in smaller Chinese cities remains weak, with plenty of unsold inventory. “The situation is uneven. Home prices in tier one and some tier two cities are going up, but elsewhere, prices are still weak,” said Jinsong Du, a Credit Suisse analyst. He adds that while housing sales are expected to pick up in the second quarter, especially on a year-over-year basis, the forecast for the second half is less clear. Analysts also said that they anticipate further accommodative monetary measures from Beijing given that property starts and investment in real-estate development nationwide are likely to remain sluggish for some time as developers fear overbuilding. New construction starts for residential and commercial property in the first four months fell 17.3% from a year earlier to 358 million square meters. That compares with an 18.4% decline recorded in the first quarter. Write to Esther Fung at esther.fung@wsj.com