China Golden October 2014 Update: Sales, Optimism Up

Here's a few of the headlines out on the last day of the Golden Week holiday within the Golden October season for real estate sales. The general tone is generally very positive, with sales up in much of the country as home buyers who plan to live in the property take advantage of the recent easing of mortgage rules.

A story on Tianjin's ghost villas. Back in June, media covered the Baodi area. Prior coverage here Tianjin Rebuilds Manhattan in Binhai; Has 90% Empty Ghost City in Baodi with several pictures. Here is a Google translated article with a few more pictures: Abandoned Villas in Tianjin.

The latest news is that prices are being slashed to move inventory. This area is dubbed "Asia's largest" villa development, with more than 3000 homes built. Prices are down 30% recently and now roughly 40% overall; below ￥5000/sqm; with homes selling for around ￥800,000, down from more than ￥1,300,000. There are several factors involved in keeping the development depressed: there's no action on a potential high speed rail stop and hospitals, supermarkets and schools are not yet built. Over 50 photos at the link. Source: iFeng. 内地知名度最高五大空城：“亚洲最大别墅区”七折

Sanya in Hainan has cancelled its remaining buying restrictions. Only the big four, Beijing, Shanghai, Guangzhou and Shenzhen still have buying restrictions. The article also quotes Zhang Dawei of Centaline saying that the government's new policies have moved marginal buyers into the market, lifting sales above forecasts and by about 10-20% above prior levels. Source: iFeng 海南三亚取消住房限购 执行城市仅剩北上广深

In Wuhan, sales are up 30% over 2013. Bank staff on site at developer sales offices said that at 30% off, bank profits are near zero, so it will be very difficult to obtain that rate. 10% off is the more likely rate buyers will receive. Source: iFeng 武汉新房成交同比增近三成 购房者交定金抢房

Another optimistic report out of Guangdong, this one on a possible market turning point. It seems the reporters there take less vacation time as most of the stories to date have Guangzhou bylines.... Source: iFeng 楼市变化成关注焦点 市民长假天天楼盘一日游

Finally an English report from the SCMP: Effectiveness of mainland housing policy easing hinges on banks

Sentiment has improved in the mainland’s housing market after a policy relaxation last week, but much depends on whether the banks embrace the spirit of Beijing’s move and free up lending.

Amid recent deteriorating economic indicators, the central bank unveiled a slew of measures to support home purchases and reopen financing channels for cash-strained developers, in the first such policy easing since 2010. The property market is a major growth engine for the broader mainland economy.

Some families hastened their home purchases, worrying that prices would soon start to rise again, and some developers stopped offering discounts, the South China Morning Post found during visits to five projects in a booming suburban area of Beijing before and after the policy announcement on Tuesday last week.

Given what the banker in Wuhan said above and how that jives with comments from bankers throughout the year, reliance on the banks is not a recipe for success.

The policy changes have brought some buyers into the market, what we don't know yet is if this is pulling demand forward or marking a turn. My sense is that this is the bull trap as outlined in this chart of bubble psychology.