A series of measures introduced the past two months by the central and local governments to shore up the sagging housing market seem to be having some positive impact on both buyers and developers, but no one is ready yet to declare the property slump over.

In Shanghai, new home purchases in November remained above 1 million square meters for the second consecutive month. It’s not usually a big month for property sales, but some home seekers apparently took heart in the recent interest rate cut by China's central bank.

"The country's real estate market will certainly benefit from the rate cut, with transaction volumes going up, hopefully," said Frank Chen, executive director, head of CBRE Research, China. "More potential homebuyers who have been sitting on the sidelines will finally enter the market instead of waiting further."

Effective November 22, the People’s Bank of China trimmed the one-year lending rate by 0.4 point to 5.6 percent. The one-year benchmark deposit rate at commercial banks was cut by a quarter point to 2.75 percent, making it less desirable to save.

The rate cuts were the first in more than two years, after economic data pointed to stalled factory growth and a weak property market.

For mortgage borrowers, the lower rates meant a savings of 234 yuan (US$38) a month on a 20-year loan of 1 million yuan.

Data released earlier by Shanghai Uwin Real Estate Information Services Co seemed to indicate the new trend might be under way.

Average daily transactions of new residential properties, excluding government-subsidized affordable housing, stood at 41,264 square meters during the last two weeks of November. They rose to 45,700 square meters during the last seven days and then soared to 66,700 square meters over the last three days of the month.

Improving sentiment

On the development side, meanwhile, confidence seems to have been perking up in the past few weeks, fueled by the rate cut, a revision of the definition of "normal" homes by the local housing authority and central bank easing of rules on ownership of multiple homes.

On November 13, Shanghai's housing authority announced that any apartment with a price tag of less than 4.5 million yuan within the Inner Ring Road would be defined as “normal” as of November 20. Previously the cap was 3.3 million yuan.

In Shanghai, a "normal" home enjoys a preferential rate in deed tax and is eligible for a waiver of business tax if the property is owned for longer than two years.

Under the revision, the price cap for “normal” homes between the Inner and Outer Ring roads was raised to 3.1 million yuan from 2 million yuan, and beyond the Outer Ring Road, to 2.3 million yuan from 1.6 million yuan.

Even earlier, on September 30, the central bank announced a cut in mortgage rates and minimum downpayment levels for some homebuyers. It said buyers who own a home and had paid off the mortgage would be considered “first-time” homebuyers, making them eligible for discounted mortgage rates of as much as 30 percent off the benchmark lending rate. Previously, they had to pay 10 percent or more above the benchmark.

In cities with no limit on the number of homes people can buy, banks can lend to existing homeowners if they have cleared previous mortgages. They were previously not eligible to get mortgages from banks.

In terms of downpayments, the new rule allows all first-home buyers to pay as little as 30 percent of the total price, and for multiple-home owners, banks can decide the downpayment level “cautiously.” The original rule stated that the buyer of a second home was subject to a minimum downpayment that could be up to 70 percent.

All these changes have combined to revitalize the property market, at least somewhat.

During the last three weeks of November, new home supply in Shanghai first rose to 388,000 square meters from 267,000 square meters, and then to 430,600 square meters, the second-highest weekly volume recorded thus far this year.

Uwin interpreted the figures to indicate that developers are becoming more ambitious in trying to unload high inventories.

"The latest batch of policies have sent positive signals to developers that governments, both central and local, are making attempts to lend a helping hand to the country's residential property market, which has been suffering a protracted decline," said Lu Qilin, a researcher at Shanghai Deovolente Realty Co.

High inventory

The value and volume of new home sales in China fell in the first 10 months of this year, although the rate of decline slowed, the National Bureau of Statistics reported earlier.

New home sold across the country in the January-October period fell 9.9 percent from a year earlier to 4.63 trillion yuan, compared with a 10.8 percent drop in the first three quarters.

Meanwhile, 776 million square meters of new housing were sold during the 10-month period, down 9.5 percent from a year ago. That compares with a 10.3 percent decline in the first three quarters.

Sluggish sales have pushed inventories to a worrying high levels.

In Shanghai, for instance, supply outnumbered sales in 10 of the last 11 months. April was the only exception, when demand just slightly exceeded new release of houses, Deovolente data showed.

As of last Wednesday, new home supply in Shanghai remained above 13 million square meters, according to www.fangdi.com, the city's official real estate information website. That compared with 4.96 million square meters of new houses sold in the city during the six months ended November 30.

High inventories, not only in Shanghai but also in other parts of the country, particularly in lower-tier cities, cloud the outlook for the housing industry in the near term.

International rating firms such as Moody's and Fitch have both expressed their concerns for the 2015 outlook despite the brighter November figures.

Moody's Investor Service recently posted a negative outlook for China's property market next year, forecasting between zero growth and a 5 percent year-on-year decline in residential sales nationwide.

"Prices will decrease as developers offer promotions and discounts to boost sales and liquidity,” Moody’s said. “Sales volumes will stabilize amid increased mortgage availability for first-time buyers and second-time buyers who have fully repaid their mortgages," the company predicted.

Fitch, in a separate report, said sales of homes in China are not likely to rebound significantly next year. Home sales nationwide may fluctuate by between a 5 percent decline and a 5 percent rise, according to its forecast.

Housing sales in 2014 are predicted to fall by around 10 percent, but not meaningfully enough to cut housing supply, said the ratings agency, which said it believes that consolidation and restructuring will continue in the next 12 months, forcing out smaller and weaker developers.