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Fitch says elation over home sales rise early
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THE recent rise in contracted sales of homes is an encouraging sign for China’s housing sector, but it’s too early to be elated over the recovery until a sustained improvement in subsequent months is seen, Fitch Ratings said in a report yesterday.
The contracted sales of homes last month rose 16 percent from a year earlier, compared with zero percent year-on-year growth in March.
Several reasons were responsible for the rise, including government easing of home purchase curbs that unleashed pent-up demand, banks accelerating approvals for loans to both buyers and homebuilders which increased liquidity, and homebuilders cutting their selling prices that helped reduce inventory, Fitch said.
The improvement in contracted sales over the past few months was also due to the recovery in demand in Tier 1 and Tier 2 cities as most homebuilders targeted these cities. Sluggish demand and high inventory levels in smaller cities, in contrast, continued to weigh on sales and average selling prices.
Demand from people upgrading their homes, in particular, will be a key support for the recovery, mainly fueled by improving affluence and supportive government policies. Meanwhile, the perception among investors that properties in Tier 1 and Tier 2 cities have better yields will also help sustain demand for housing in larger cities, Fitch said.
Prices of new homes in China’s 70 major cities rose 0.3 percent in April from a month earlier, the first increase in 10 months, according to official data.
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