China's property market finally finds a floor

By Langi Chiang and Alan Wheatley - Analysis

BEIJING (Reuters) - Pent-up demand is pulling China's housing market out of the doldrums, but industry experts doubt that a strong, sustained recovery is about to take hold.

Urban property prices rose in March for the first time in seven months, adding to evidence of recovery witnessed in rebounding sales since the start of the year.

Residential transactions, excluding social housing, rose 24.7 percent by value in the first quarter compared with a year earlier, according to the National Bureau of Statistics.

All in all, analysts reckon the steep decline in property prices is over after a slump of more than 20 percent in some cities in the past year.

But that's not the same as saying a rebound in prices is in the offing.

"A big difference in this recovery is that it is coming from the end-user market," said Anton Eilers, executive director for China's residential market at CBRE (CBG.N), a global property services provider.

"We are not seeing significant numbers of investors coming back into the market, looking at capital appreciation," he said.

That is in stark contrast to 2005 to 2007, when speculative buying was at its peak, and means that if prices rise by more than owner-occupiers expect, sales volumes will immediately drop.

The case of Beijing illustrates the point. The number of units sold in the capital fell 5 percent in the week ending April 26 from the week before after many developers raised prices, domestic media reported.

SIGNS OF RECOVERY

When China's housing market was booming, it was common for buyers to queue the night before a developer started pre-selling a project still under construction.

Such scenes, not seen for more than a year since the market went into a swoon, are now being replayed.

"We came here yesterday afternoon. It's still a bit cold on a spring night," said Qu Qiuping, a woman in her forties who lined up overnight with her husband last Saturday to buy a 60 square meter (650 sq ft), one-bedroom flat in a new building in eastern Beijing.

More than 80 percent of the apartments in the building had been sold by the end of the first day, according to Wang Dan, a sales agent for the project.

While the mid-end mass market is warming up, CBRE's Eilers said a recovery in the luxury residential sector will depend on a firm turnaround in the overall economy.