Yahoo Finance China New Home Sales Struggle in Face of Lopsided Recovery
(Bloomberg) -- Chinese developers are facing headwinds offloading new home inventory, despite a rebound in second-hand transactions in mega cities.
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In Shenzhen, new home sales fell 4% in June compared with last year, even after the government relaxed measures to stimulate the market. Midland Realty said developer inventory remains high, adding to the polarizing results between new and existing apartment sales. In the capital of Beijing, new property sales underperformed existing ones in June, said Centaline Group analyst Zhang Dawei.
Buyers remain cautious toward new apartments in China’s so-called first-tier cities, as the units are often offered at relative higher prices or located in suburban districts. That’s causing a divergence in recovery, underscoring the challenges for cash-strapped developers, many of which are counting on a sales revival to relieve their liquidity pressure.
“Homebuyers prefer cheaper used dwellings in urban zones with plenty of shops, schools and hospitals nearby,” said Zhang Hongwei, founder of Jingjian Consulting, which advises real estate companies. New property sales may weaken further in late July, he added.
The weakness in new-home sales is hindering China’s economic recovery, which is expected to undershoot the government’s 5% growth target for this year, Bloomberg Economics estimated last week. While the slump in sales from China’s 100 biggest developers narrowed last month, June transactions remained at a low level, China Real Estate Information Corp. said.
“Dim outlooks for home prices and employment remain barriers to a sustainable, broad-based recovery,” Bloomberg Intelligence analysts led by Kristy Hung wrote in a Tuesday note.
Economists are predicting that the central government will push out new measures to shore up the market, after top policymakers urged officials to be more “creative and bold” in rolling out supportive measures. That’s in addition to China unleashing 300 billion ($41 billion) of central bank funding to help government-backed firms buy excess inventory from real estate companies.
The recovery in second-hand homes however is providing some relief for owners seeking to cash out.
In June, the number of existing residential properties sold in Shenzhen soared to the highest monthly level in more than three years, beating expectations, according to Midland Realty. Similarly, they jumped to the highest in almost three years in Shanghai, and the most in 15 months in Beijing, according to official and Centaline data.
In Shanghai, about 70% of used properties sold are urban, rundown residences below 4.5 million yuan, according to Jingjian’s Zhang.
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