First-time buyers boost home sales in smaller cities

Despite a month-on-month slump of housing prices in May for the first time in almost two years, some leading domestic developers remain optimistic that inelastic demand from first-time buyers will revive transactions in second- and third-tier cities.

A customer walks past an Evergrande sales outlet in Yichang, Hubei province. Some leading domestic developers remain optimistic that inelastic demand from first-time buyers will revive transactions in second- and third-tier cities. Zhou Jianping / For China Daily

He Miaoling, vice-president of Hong Kong-listed Evergrande Real Estate Group Ltd, said the property sector seems to have stabilized after some major shifts earlier this year, including the decline in May and the failure of some small developers.

"Transactions were robust in June, especially in second- and third-tier cities. We've gotten a boost in confidence about sales," He said.

According to the China Real Estate Index System, an affiliate of SouFun Holdings Ltd, sales by area in 40 cities rose 13 percent month-on-month in the second week of June, with a year-on-year gain of 7 percent.

On Sunday, sales at a new Evergrande project in Pingdingshan, a coal-rich city in Henan province, reached 610 million yuan ($98 million).

The group said that was a single-day record for a new launch in a third-tier city.

"The robust performance will help promote a steady recovery of the home market," said He.

The Guangzhou-based property developer, a market leader, said sales rose 64.4 percent to 56.21 billion yuan from January to May. That's more than half of the full-year sales target of 110 billion yuan, company sources said.

Sales of Poly Real Estate Group Co Ltd, another major developer, posted a dramatic reversal from a 12 percent decline in April to a 10 percent gain in May, company sources said.

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