(Bloomberg) — Two of China’s biggest cities saw improvements in homebuyer sentiment last weekend after relaxing property restrictions, the first positive signs in months for the embattled real estate sector.
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In Shanghai, about 90% of the more than 300 units offered at a new project over the weekend were sold, beating the sales-through rate for the same development in March. In Shenzhen, some developers saw buyer interest surge so much they rescinded discount offers. Existing-home sales recovered in both cities.
China’s real estate slump has finally shown signs of abating after the central government rolled out its most forceful rescue package to halt the three-year downturn. The loosening has trickled out at local level, with more than 200 cities across the country easing purchase restrictions and downpayment ratios, according to a tally by the state-run Xinhua News Agency. It accelerated last week as megacities Shanghai, Shenzhen and Guangzhou followed through.
“The gradual improvement of market sentiment came after the strong policy support announced in mid-May,” said Raymond Cheng, head of China property research at CGS International Securities HK. Cheng expects sales to improve further this month.
Read more: China Property Stocks Gain as Home Sales Drop Eases
In the financial hub of Shanghai, so many prospective buyers lined up for a project by state-owned Xiangyu Real Estate Group Co. on Sunday that some had to view model apartments themselves instead of being escorted by staff, an agent said.
“I haven’t seen such a big wave of customers coming in for a long time,” said the agent, Zhao, who only gave her surname because she wasn’t authorized to speak to the press. “We’ve been working days and nights to answer questions.”
In Shenzhen, state-owned Poly Developments and Holdings Group Co. canceled the 2% discount offered for its Jade Apartments residential project in the district of Longgang on Saturday. Similarly, local builder Galaxy Real Estate dropped its 2% rebate after meeting its May sales target in advance.
Shares of China’s beaten developers have climbed on optimism that the worst of the crisis may be over. New-home sales at the 100 biggest real estate companies dropped 33.6% from a year earlier in May, easing from a 45% decline in April, China Real Estate Information Corp. data showed. A Bloomberg gauge of Chinese builders listed in Hong Kong gained as much as 2.3% on Monday. It has advanced 42% from an April low.
The recovery is more evident in the used-home market, which has overtaken the new-home sector by sales. Buyers have been drawn to heavier declines in prices of existing homes, as well as the reassurance that they are already built. In Shanghai, second-hand sales last weekend were 50% higher than the daily average for the month, according to data from the city’s property transaction agency.
In Shenzhen, existing-home sales gained 8% over the past weekend to the highest level in more than three years, according to property agency Leyoujia, citing transactions it worked on. Leyoujia is the biggest real estate agency in the city.
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