Property Sales Surge During National Day Holiday

By Casey Hall and Clare Jim

SHANGHAI (Reuters) – Property sales surged in some Chinese cities during the week-long National Day holiday after several stimulus measures were unveiled to support the market. However, analysts caution that it is premature to declare a solid recovery, as further stimulus may still be needed.

Just days before the Golden Week holiday began on Oct. 1, policymakers announced imminent cuts to mortgage rates for existing home loans as part of a package to stabilize the declining sales and prices in the struggling sector.

China’s property market has faced a downturn since 2021, following numerous cash-strapped developers’ defaults on loans, leaving a large inventory of new homes and unfinished projects that have adversely impacted the broader economy and eroded consumer confidence.

During the holiday, the number of home visits, an indicator of buying interest, increased noticeably, with sales in various locations showing “varying degrees” of growth, as reported by state broadcaster CCTV on Saturday.

More than 50 cities implemented policies to uplift the real estate market, with nearly 2,000 developments from over 1,000 property companies participating in promotional activities, according to the Ministry of Housing and Urban-Rural Development.

Shenzhen, a major southern city, witnessed significant improvements in market sentiment. Between Oct. 1 and 3, home sales in the secondary market surged 233% year-on-year, while new home sales soared 569%, as reported by Shenzhen Centaline Property Consultants.

In Shanghai, requests to purchase new flats at various real estate projects hit record highs, with some projects seeing subscription rates exceeding 80% to 90%.

During the first three days of the holiday, 345 groups visited a development by state-backed China Resources Land in suburban Shanghai, resulting in 46 unit sales worth 261 million yuan ($37.2 million), as reported by local media.

Realtor Leyoujia noted a staggering 979% year-on-year increase in new home transactions in its Shenzhen branch from Sept. 30 to Oct. 6, and secondary market deals rose by 298%, according to Shanghai Securities News.

Raymond Cheng, head of China property research at CGS International Securities, expressed optimism that positive sales momentum in these cities might indicate potential recovery in other regions, supported by robust policy measures and improving market sentiment.

More comprehensive sales data for the Golden Week holiday is expected from private survey companies in the coming days, which will be compared to a 17% decline in average daily home sales from the previous year.

Golden Week is historically a peak sales period for new homes in China, with developers offering various promotions and launching new properties.

Cheng believes that China’s property sales could witness positive growth in the fourth quarter. However, J.P. Morgan analysts warn that the momentum is not as strong compared to when the economy reopened post-pandemic in early 2023.

They noted that any solid improvement in sales in the upcoming weeks could be merely a knee-jerk reaction to the easing of policies. November sales data will be crucial to ascertain if the market has hit bottom.

Furthermore, low-tier cities, where property oversupply is more pronounced due to declining populations and weaker fiscal health among local governments, have not yet experienced an uptick in demand.

UBS analysts estimate that China may need as much as 3 trillion yuan ($427.50 billion) in funding to address excessive home supplies in 80 large cities and may depend on banks or the central bank to support the initiative.

They anticipate that the latest economic data will continue to reflect weak momentum, although early October property sales and Golden Week consumer spending appear improved. They expect a significant fiscal package announcement in the near future.

($1 = 7.0176 Chinese yuan)