Reality check for realty sector

Housing prices slumped further in China in May with more homebuyers preferring to stay on the sidelines in anticipation of a further drop in prices.

The number of cities that experienced a month-on-month price decline surged to 35 in May, compared with only eight in April, according to data released by the National Bureau of Statistics on Wednesday. Only 15 out of the 70 cities monitored by the NBS saw a higher price over April, compared with 44 in April.

On a year-on-year basis, Wenzhou was the only city that reported lower prices in May from a year earlier,the same situation as in April. The largest gain was about 11.3 percent, down from 13.6 percent in April.

Prices in large cities also cooled. Among the four tier-one cities, only Beijing recorded a month-on-month rise of 0.2 percent, while Shanghai posted a 0.3 percent decline, Shenzhen a 0.2 percent fall and Guangzhou barely changed, according to the NBS.

Yan Yuejin, an analyst with the Shanghai-based E-house China R& D Institute, said the realty downturn in smaller cities contributed to the price cooling in bigger cities. "The wait-and-see" sentiment was strong among prospective homebuyers and this in turn hit home sales," he said.

Home sales nationwide dropped by 9.2 percent during the first five months, against the same period a year ago, according to NBS data. In Beijing, home sales slumped 34.9 percent on a year-on-year basis during the period.

Huang Xiaoyun, general manager of the Shanghai unit of E-house (China) Holdings Ltd, a real estate services company, said the supply-demand gap widened in May, citing figures from the 90 residential projects that he oversees in Shanghai.

"Prices are still unsubdued. I've never seen developers openly advertising 5 percent price cuts," he said. "Buyers are also becoming more tough in bargaining. Some buyers are not even keen on property visits, unless the prices are reduced by 5 to 10 percent."

Although sales have slumped, property prices have not retreated that much in large cities. While developers have adopted several strategies, it has had a limited effect on overall sales, Huang said.

Even so, data from E-house China R& D Institute showed that prices of newly sold homes in the four major cities rose 3.7 percent month-on-month in May to 23,072 yuan ($3,690) per square meter. Prices in Shanghai climbed 6.6 percent, while in Guangzhou they rose by 14.4 percent.

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