Property market rebounds but housing stocks flat

Potential homebuyers seek information at a property sales office in Rizhao, Shandong province. [Photo/VCG]

China's property sector staged a revival in March, with real estate investment, sales, housing new starts and funding all rebounding strongly.

Real estate investment, which accounted for a fifth of total investment, in the first quarter expanded 6.2 percent from a year earlier, up from 3 percent in the first two months and 1 percent in 2015, according to the National Bureau of Statistics.

Housing sales, which often preludes investment, surged 54.1 percent from a year earlier, up from 43.6 percent in the first two months, while in volume terms sales rose 33.1 percent.

For the first time in months, unsold residential space dropped by 6.52 million square meters from the end of February, showing progress in destocking.

The upsurge in sales also drove up developers' construction appetite, with housing new starts surging 19.2 percent, up from 13.7 percent in the first two months.

The acceleration was backed up by funding.

People's Bank of China's data on Friday showed outstanding loans to developers rose 15.4 percent from a year earlier, while household mortgages surged 25.5 percent, a growth rate that has been steadily rising since last May, reflecting warmup in housing demand.

Economists are not convinced, however, the rally will continue.

Figures from Bloomberg Intelligence Economics show China has been building about 10 million new apartments a year for the last five years, with fundamental demand running at less than 8 million units a year.

Against that backdrop, any rebound in construction appears set to be short-lived, it said.

Su Aik Lim, a property market analyst with Fitch Ratings Inc, said the strong upswing in the first quarter is partly due to the low comparison base a year earlier.

Oversupply remains a major drag, indicating it is hard for investment to rebound to double-digit territory. But it is also unlikely that investment will dive further.

Housing stocks in the domestic A-share market were largely flat on Friday despite the property revival in the first quarter, with no property stocks rising to the daily limit of 10 percent.