By June Yang
Housing transactions over the Dragon Boat Festival (June 22-24) surged to their biggest high since the Chinese government introduced home-buying restrictions. Local media reported 17,198 units were shifted over the 3-day holiday, 140.6 percent more than the May 1 Labor Day vacation and 203 percent over last year’s Dragon Boat Festival.
In Beijing, 1,775 homes were sold, 204 percent more than on Labor Day and 407 percent more than the same holiday last year.
While transactions volumes surged, average home prices were stationary, according to property agency Centaline’s research center.
Analysts from the center attributed the surge in transactions to an over-interpretation of the People’s Bank of China’s recent 25 basis points interest rate cut, its first in almost 3 years.
In a report, JP Morgan said it’s keeping its expectation that China's average home prices would decrease by 5-10 percent this year. Shenyin & Wanguo Securities also said in a report that home prices won't rise too much as long as the central government still tightens home purchase quotas.
"China has limited tolerance for the property industry, because it has begun to handicap the government's macro-control of the whole economy," said Huang Haizhou, chief strategist at China International Capital Corp.
Huang predicted China’s Consumer Price Index for June will be 2.3 percent, and may fall further to less than 2 percent in July and August.
“All these data show that the market is lacking liquidity, there soon may be another round of interest rate cuts, the same as the current situation. Previous interest rate cuts were not enough to rescue the property market, though looser monetary policy may provide a better environment.”
“As policy restrictions are still there, banks would cautiously issue loans to property developers," Huang added.