With the traditional off-peak season (mainly July and August) around the corner, and demand released, residential transaction volumes are expected to decline in the next quarter. Selling stock will still be the primary goal for most developers, thus a decrease in average prices is expected in the third quarter. 

A series of preferential real estate polices and sales tools were put in place during the Spring Housing fair in April, which aided in transaction volumes reaching the second highest point in five years, to 728,600m2, which accounted for 16% of the total transaction volumes seen in Q2/2016. In addition, more polices were implemented after April, which further pushed up transaction volumes. Due to the number of new projects launched in Q2/2016, both vacancy rates and prices increased. 

The Liangjiang New Area saw two high-priced land transactions which pushed the average price up to RMB3,012 per square metre. Meanwhile, land transaction volumes recovered from their poor performance in Q1/2016, and increased QoQ; however, they remained significantly down YoY. 

Real estate investment reached RMB172 billion in June 2016, up1.5% YoY. Of this, residential investment was recorded at RMB106 billion, with the downward rate declining to 1.5% YoY, accounting for 61.6% of total investments, mirroring the recovering confidence of investors in the city’s real estate market. 

Transaction volumes reached 4.57 million m2, up 12% QoQ and 2% YoY, due to the combination of the Spring Housing Fair and the favourable polices which were carried out in 1H/2016. For example, the change from Business Tax to Value-Added Tax (VAT) that was released in May by the Ministry of Finance stimulated demand from some owners of private enterprises. Additional stimulating polices released in the first three months of 2016 successfully improved the confidence of developers, with more new projects entering the market with less discounts and more purchasers with significantly increasing demand. This benefitted both transaction volumes and average prices. 

1H/2016 has seen a good performance, predominantly due to the Spring Housing Fair. Transaction volumes from the Spring Housing Fair reached 728,600m2, up 45% QoQ (compared with the Autumn Housing Fair in 2015) and down 22% YoY (compared with the Spring Housing Fair in 2015), with the highest price seen in the last three years of RMB6,639 per m2. 

A number of polices and sales tools could have contributed to the good results. For instance, nearly all the projects sold during this time could be purchased with an application for the housing provident fund loans, and the main banks in China launched some loan programmes to aid migrant workers to purchase a home more easily. 

Differing from the mass market, the high-end residential market witnessed a decreasing trend this quarter, with prices decreasing 0.8% QoQ to RMB16,712 per m2. This was mainly due to the majority of developers lowering their prices in order to increase transaction volumes. Three newcomers, namely River Hill Villa, The Coronation and Evergrand Yuduhui, were sold at a price of RMB13,000 per m2, RMB13,700 per m2 and RMB12,500 per m2, respectively. 

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