Faint signs of warming have emerged in China's property market as the extended fall in prices began to moderate in May, a key survey showed.
Average housing prices in 100 major Chinese cities fell by a slower pace on a month-to-month basis in May, slipping 0.31% from April when they were down 0.34% from March, according to the China Real Estate Index System, a private data provider.
It was the first instance of a narrower decline, after four months of accelerating losses, and likely reflected policy easing at the margins of the property market by Beijing and local governments in an effort to reverse slowing economic growth.
The data, compiled from a survey of property developers and real-estate agencies, followed a report by another provider on Wednesday that showed transactions were up in some major cities in late May.
However, housing prices in 100 major Chinese cities were lower year-to-year for the second straight month in May.
"While prices will continue to fall on a year-on-year basis, you can see some signs of stabilizing on a sequential basis," said Kris Li, a property analyst from Shenyin Wanguo Research and Consulting. "Developers are not expanding their price cuts and are testing the market with smaller discounts."
Average property prices have been declining steadily as a result of more than two years of market tightening measures—such as limits on home purchases and tighter credits for developers—aimed at keep prices from spiraling out of control.
But Beijing said in February that financial institutions should support demand from first-time home buyers, and it allowed banks to offer discounts on mortgage rates.
The central government also said it would reform its local residency system, and that has enabled local governments to offer easier residency rules for out-of-town buyers.
While the central government is likely to maintain its limits on home purchases, investors have been watching closely for other signs it may be relaxing its grip on the market.
The China Real Estate Index System said its survey of property developers and real-estate agencies showed the average home price in May fell to 8,684 yuan ($1,363) a square meter, down 1.53% from a year earlier. That's a bigger drop than April's 0.71% decline. On a sequential basis, average home prices continued to be lower for the ninth straight month.
China Real Estate Index System, which compiles the data together with online real-estate brokerage firm SouFun Holdings Ltd., said property prices in 73 cities fell in May compared with the previous month, while 26 cities showed a rise. The remaining city had no change.
On May 30, figures from data provider China Real Estate Information Corporation showed that in terms of floor area, housing sales in the final week of May rose 39.6% from a week earlier to 107,200 square meters in Shenzhen, and 27.1% over the previous week to 185,400 square meters in Shanghai.
"Transactions have bottomed out but I don't think that means prices will go back up," said Michael Klibaner, head of research for China at Jones Lang LaSalle. "Developers will still have difficulties in regaining pricing power because of the high inventory levels."
At a center for registering real estate transactions in Shanghai's Xuhui district, staff said that there has been a pickup in the number of applications for property deeds from homebuyers in recent weeks.
"While there have been more occasions when there is standing room only, there are still some periods when it's slow," said a counter staff who gave her surname as Wang.
Market expectations have been rising for some form of policy easing measures, such as letting financial firms offer preferential mortgage and down payment rates, though limits on home purchases are likely to remain in effect for some time.
Beijing has shown some tolerance for fine-tuning measures by local governments that don't directly contravene its tightening stance but it is struggling to balance growth and high property prices. Too much tightening might lead to a hard landing, but easing policy curbs too soon could send prices surging again and undermine government credibility.
Last month the housing ministry endorsed a plan by the eastern Chinese city of Yangzhou to provide subsidies of between 0.4% to 0.6% for purchases of newly built homes with finished interiors.
