Although hurt by the early stage of the COVID-19 outbreak, China's real estate industry led by the residential sector is recovering rapidly, especially in first-tier cities, official data showed.
The National Bureau of Statistics said home sales rose 9.7 percent year-on-year in May, reaching 147 million square meters nationwide.
In terms of home price changes, 57 out of the 70 major cities monitored by the NBS reported their new home prices rose. In April, 50 cities reported higher home prices. In the pre-owned home market, 41 cities registered home price rises in May, up from 37 in April.
New home prices in China's four first-tier cities rose 0.7 percent in May from April on average. Shanghai took the lead (0.8 percent), followed by Shenzhen (0.6 percent), Beijing (0.5 percent), and Guangzhou (0.3 percent), according to NBS data.
Compared to last year, four top-tier cities saw a 2.9-percent growth in their new home prices in May.
In the more representative pre-owned home market, prices in Beijing, Shanghai, Guangzhou and Shenzhen rose by 1.8 percent, 0.6 percent, 0.4 percent and 1.6 percent respectively in May, compared to April. The average pre-owned home price rise in May was 4.1 percent year-on-year.
Xu Xiaole, chief market analyst with the Beike Real Estate Research Institute, said price rises reflect recovery of the real estate market from the constrained demand of the previous months. Real-time transaction volume of existing homes in 18 key cities the institute monitors saw a 19-percent month-on-month growth in May.
The acceleration in price growth in some of the first-tier cities is the result of a pickup in demand as homeowners look to upgrade their primary residence and investors look for safe havens, said James Macdonald, head and senior director of Savills China research.
"There may also be some pent-up demand from the first quarter pushing up volumes and rising expectations that prices might increase in the short to mid term, especially if mortgage rates trend downward," said Macdonald.
In the pre-owned home market, recent price increases might be due to restrictions that still exist in the new home market in many cities, he said.
Thanks to the effective measures taken in preventing and containing COVID-19, businesses are gradually resuming, and so is the property sector.
"Most Chinese cities in May saw their residential sales recover or even get better than that of a year ago," said Zhang Dawei, chief analyst at Centaline Property Agency Ltd. "The recovery is also appearing in the land market."
According to Zhang, combined land sales in 50 major Chinese cities gained 8.8 percent year-on-year to reach 1.7 trillion yuan ($242.3 billion) in the first five months of this year.
Beijing, Shanghai and Hangzhou of Zhejiang province each saw its land sales surpass 100 billion yuan.
"The increasing land supply, and acceleration in land and new home sales process have helped bolster new home prices in recent months," said Sheng Xiuxiu, research director of JLL China residential sector.
Despite some common factors, each of the top Chinese cities has its peculiar reasons for the improvement in home sales.
For instance, Shenzhen has consistently recorded strong growth over the last year in the pre-owned home market, possibly due to the relatively restricted supply of new homes, while available land for new development in central locations is also relatively limited, Macdonald said.
Industry insiders believe the development of the Guangdong-Hong Kong-Macao Greater Bay Area economy has not only effectively supported Shenzhen's housing prices, but also contributed to the sales of prime real estate there.
"The quality and quantity of a city's talent is a deciding factor in a region's economic development, and their settlement in the city will inspire the demand for medium-to high-level residential properties," said Jiang Peng, senior associate director of research in East China with Colliers International.
Regional integration is likely to bring economic gains through aggregation of the labor pool and boost to productivity. Larger cities are likely to attract regional headquarters of big businesses and organizations, and their senior management will likely boost demand for high-quality homes, Macdonald said.
As land prices rise, it is only natural that developers will target the higher end of the market in order to achieve the right price point to generate a reasonable return on investment.
In Shanghai's case, increased supply of new apartments helped boost sales, and its adjustment of primary and junior middle school enrollment policies supported the sales of pre-owned flats located in better school districts, said Sheng.
Hangzhou's housing market is supported by the rapidly growing technology sector and the jobs and the wealth being created by it and the supporting industries. At the same time, the market has been supported by the campaign to attract talent and corresponding population influx.
Beijing and Guangzhou have had relatively flat markets over the last year and might be viewed as being comparatively affordable.
"Additionally, Guangzhou has a pivotal role in the development of the Greater Bay Area while also being less expensive than its neighbor Shenzhen," said Macdonald.
With LPR (loan prime rate) having remained the same for the last couple of months and a tougher stance of the central government on the property market, experts expect prices to continue to rise but at a slower pace.
"In fact, the growth rates of existing homes in Beijing and Shanghai slowed in June," said Cheng Chong, an analyst with the big data research institute of Shenzhen Fangdd Network Technology Co Ltd, the nation's largest online property trading service platform.
The suppressed demand in February and March because of COVID-19 had been mostly negated in May and June; and the supporting measures announced in the first half of this year aimed to ease the difficulties of property developers, and are also in line with the principle of "housing is for living in, not for speculation", said Cheng.
Despite disparities between property markets in Chinese cities, stability will continue to be the key word for the home market in the second half of the year, said Ding Zuyu, CEO of E-House (China) Enterprise Holdings Ltd.
"Local governments will follow the central government's guideline to maintain a stable property market. On the other hand, although I have the feeling that home sales will see a 5-percent dip in terms of gross floor area, overall property sales revenue of the year will continue to be at a comparatively high level," said Ding.
Zhang Hongwei, chief analyst with Shanghai-based property consultancy Tospur, said the recovery in new home sales in top-tier cities is structural. He said he believes the trend is going to extend into the rest of the year.
"It's worth mentioning that the market performance is not yet regarded as overheated, especially in comparison with the conditions of 2009," said Zhang.
Agreed Sheng. According to her, restrictions on home purchases in first-tier cities have kept the price rise in a tight band. On an annual basis, new home prices in Beijing, Shanghai, Guangzhou and Shenzhen edged up merely 0.6 percent, 2.8 percent and 3.9 percent between 2017 and 2019, much more stable than that in second-and third-tier cities.