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2nd LD Writethru-China Focus: Housing market continues to show signs of life

Xinhua, June 18, 2015 Adjust font size:

China's housing market continues to show signs of improvement after a prolonged downturn, with new home prices dropping in fewer cities for a third consecutive month amid recovering market confidence and lower interest rates.

On a monthly basis, new home prices fell in 43 of the 70 cities monitored by the government in May, down from 48 in April, according to data released on Thursday by the National Bureau of Statistics (NBS). Prices climbed in 20 cities, up from 18 in April.

Year on year, 69 cities reported new home price drops. Shenzhen is the only exception, registering a 7.5-percent increase.

While the market largely remains anemic, there is a developing trend of home prices rising in first-tier cities, backed by the government's support policies.

According to NBS statistician Liu Jianwei, average new home prices in top-tier cities gained 1.7 percent on a monthly basis in May, while those in some smaller third-tier cities declined.

New home prices in Beijing, Shanghai, Guangzhou and Shenzhen increased 3 percent month on month in May.

For existing homes, 28 cities saw price declines in May on a monthly basis, five reported flat prices, while 37 cities posted gains.

New home sales in the first five months topped 2.4 trillion yuan (about 400 billion U.S. dollars), up 3.1 percent from one year earlier, reversing a decline of 3.1 percent registered in the first four months.

Improving prices and turnover confirmed the market bottomed out in the second quarter, steadied by a recovery in first-tier cities that was boosted by the government's support policies, seasonal factors and recovering market confidence, said Bank of Communications analyst Xia Dan.

China's property market took a downturn in 2014 due to weak demand and a surplus of unsold homes. The cooling has continued into 2015, with both sales and prices falling and investment slowing.

A weak property sector and shrinking exports due to sluggish external demand dragged China's economic growth in the first quarter to 7 percent, its lowest level in six years. Recent data signaled the weakness may persist into the second quarter, putting more pressure on the government to step up supportive measures.

The central bank has moved to combat the slowdown, cutting benchmark interest rates three times since November and lowering banks' reserve requirement ratio twice since February.

The country also eased down payment requirements for second-home purchases at the end of March, and some local governments have rolled back their restrictions on home purchases.

Wang Tao, chief China economist at UBS, predicted more policy support to come in the shape of infrastructure and monetary easing measures, and another interest rate cut in the next few weeks.

Helped by the supportive policies, home sales will continue picking up during the rest of the year, with further price rises in first-tier cities, according to Xia. Endi