Property rebound led by top-tier buys

Property prices have risen in China since measures to curb the coronavirus were eased in March.

The market appears to be brimming with pent-up demand amid a supply shortage, with at least one big property developer making plans to diversify into pig farming.

Much of the recovery is likely to be driven by the mid to high-end market, analysts say, but any improvement will hinge on what policies are announced at next week's parliamentary sessions.

In March, residential home prices crept up after staying stagnant in February, official figures show.

Prices of new homes in 70 major cities, excluding state-subsidised housing, rose 0.13 per cent in March from the previous month, according to data from the National Bureau of Statistics. Officials say it indicates pent-up demand.

Like offices, property showrooms reopened and residential compounds began to allow in-person viewings. This is especially apparent in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, said the president of the China Urban Real Estate Research Institute, Mr Xie Yifeng.

While Beijing maintains that homes are for living and not for speculation, Mr Xie says banks may not be able to track closely where business loans go as many borrowers set up shell companies to buy property.

In Shenzhen, some speculators had exploited loans extended to small and medium-sized enterprises in recent months, but the authorities banned these practices this month.

Meanwhile, several local governments, including those of Tiangjin, Chongqing and Dalian, have eased housing policies to enable young people to buy homes.

Ratings agency Fitch noted at the end of last month that cities in the second and third tiers are offering subsidies on deed tax and raising the upper limit of housing provident fund loans.

"However, the local authorities have yet to lower the down payment requirement, suggesting concerns of a potential overheating of the housing market," it added.

The coronavirus outbreak had prompted developers to hold back the launch of new developments, especially high-end properties, earlier this year.

Transaction data shows prices of new luxury homes in the first quarter fell 1.1 per cent in Beijing to 96,774 yuan (S$19,400) per sq m, but rose 2.2 per cent in Shanghai to 110,4000 yuan per sq m.

"New launches of these high-end properties are, in many cases, oversubscribed, with buyers having been starved of new stock," property agent Savills wrote in a research note. "In many cities, the high-end market is likely to outperform the mainstream market in the remainder of the year as buyers of mainstream properties, which have outperformed high-end properties in recent years, are more likely to take on mortgages and be financially stretched than buyers in the high-end market."

Financing for buyers is also an area of concern for many, noted Professor Dong Fan of Beijing Normal University, who specialises in real estate research.

"If the economy slows and the debt default occurs in the residential sector, could it cause a serious economic crisis?" he wrote on Weibo. "The current policy is to dilute part of the debt by giving more time (for repayment)."

For some developers, this is also a time to diversify their business.

China Vanke, the country's third-largest home builder, is moving into pig farming, according to job advertisements on its website.

It is hiring for five roles, including vets, farm managers and specialist builders.

The ads indicate that it is looking to raise 250,000 pigs for a facility in Shenzhen.

The group's business includes logistics, eldercare and education.

But what direction the property market takes will depend on policies announced next week, said Mr Xie. "Is the central government going to make it easier to buy? Might they loosen rules for bank loans? We can only wait and see."