China's property market still under pressure in May

China's property market still lacks the momentum for recovery, with consumer confidence in the market this month still staying weak and domestic property enterprises continuing to struggle with heavy debts, Mysteel Global noted.

During the three weeks over May 1-21, new home sales across the 50 key cities nationwide averaged 4.3 million sq m/week, lower by a significant 17.7% from the weekly average over April 1-30, according to the latest survey conducted by China Index Holding (CIH), a specialized platform dedicated to domestic real estate research. The sales volume during the three weeks was also hovering around the lowest for the past five months, CIH data showed.

"Judging from the historical records, new home sales usually rise in May, but this time they went down," a market analyst based in Shanghai said. This indicates that the interest of home buyers in acquiring new properties is continuing to cool this year and exerting greater pressure on the domestic property market, Mysteel Global notes.

Meanwhile, new listings for previously occupied homes have shown a marked increase recently, which means that some homeowners are trying to reduce their property assets, the analyst noted. "The growing supply of second-hand properties is also suppressing transactions for new homes," he added.

Chinese house prices also softened during the first half of May. Statistics compiled by the China Society of Urban Economy showed that house prices in Shanghai and Beijing had dropped by 0.68% and 0.34% respectively over May 1-15, while during the same period prices in South China's Guangzhou and Shenzhen had fallen 0.52% and 0.11%.

The four cities are all first-tier cities where the house prices should be buoyant, Mysteel Global noted, so the price dips in these major urban centres seem to reflect intensifying market gloom across the whole country.

"Even though the trading activity of residential land is recovering, it is still unlikely to provide any sustainable support for house prices," the Shanghai-based analyst remarked.

On the other hand, during the past two months, many property enterprises avoided using the revenue they'd earned from home sales for investing in new property projects, and instead, chose to use the funds to ease their heavy debt burdens, the analyst pointed out. This may cause domestic property projects to progress more slowly than expected, he warned.

Over January-April, the total area of newly-launched property projects throughout China dropped sharply by 21.2% on year, even though the record during the first four months of last year was already very low, according to data released by the country's National Bureau of Statistics.

Written by Anthea Shi, shihui@mysteel.com
Edited by Zhenqi Yang, yangzhenqi@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.