Market booming as housing inventory drops in cities

A sales woman introduces a property program to visitors at a spring real estate exhibition held in Beijing, April 17, 2015. [Photo/IC]

China's first-tier cities saw a real estate boom in the first month of 2016, with housing inventory dropping after the government issued a series of policies aimed at clearing a property glut across the country.

In Beijing, there were 6,048 second-hand housing transactions in the first week after the Spring Festival (Feb 14-20), the best since 2010, according to the market research center of Beijing-based real estate agency 5i5j.com.

The average rate per square meter for a new house reached a record high of 35,882 yuan ($5,550) in January in Shanghai, said Centaline Property Research Center.

E-house (China) Holding's research institute said in a report that the average housing inventory in China's first-tier cities dropped below 10 months with Beijing at 9, Guangzhou at 7 and Shanghai at 4 months.

Unlike many non-first-tier cities that need to address housing oversupply, Shanghai has to offer more houses for people to buy - otherwise the property would go up further, he said.

Zhang Dawei, chief analyst at Centaline Property Agency, said a series of policies recently issued by the government to boost the property market have already first seen results in first-tier cities.

China will cut deed and business taxes for home purchases in most cities in an attempt to ease the property glut, an official statement said last week.

The Ministry of Finance said houses above 90 square meters will be levied a deed tax at 1.5 percent of the house price for first-time buyers in all Chinese cities, down from the current 2 percent.

The central bank said earlier last week that China would raise the deposit interest rate for its housing provident fund to give higher interest rates on their savings.

The rate increased to 1.5 percent starting Sunday, the People's Bank of China (PBOC) said in a statement. The current rate is 0.35 percent, or 1.1 percent, depending on when the deposits were placed.

The housing provident fund is a savings program that allows employees and employers to set aside a portion of wages to be used as deposits on home purchases.

"The move will help employees gain reasonable returns from their deposits, making the program fairer and more effective," the PBOC said.

Analysts said although some of the policies were mainly made for medium and small-size cities, it was first-tier cities that were most sensitive to the market because of their bigger purchasing power and larger demand.