The secondhand housing market cooled in December in Beijing and Shanghai as turnover fell, and an increasing number of sellers dropped prices, leading industry observers to wonder if the move indicates an inflection point in the white-hot property market.

In Beijing, the volume of secondhand transactions decreased 16.6 percent in the period from Dec 1 to Dec 22, compared with the same period in November, according to Homelink, a housing brokerage firm. In October, 59.7 percent of sellers registered at the brokerage offered a lower price than in the previous month, and the same ratio rose to 69.3 percent in November and to 71.8 percent in December.

In some cases, the closing price for a single unit dropped 250,000 yuan ($40,851) in a short period, while the offering price for some homes on sale also fell by more than 10 percent, Chinese media reported.

The same thing happened in Shanghai. Residential property transactions there declined in December, with some districts seeing a drop in trade volume ranging from 30 to 50 percent from September, according to real estate brokerage Century 21.

To attract buyers, some sellers offered discounts of almost 4 percent in some downtown areas.

Zhang Hongwei, research director of the Shanghai-based property consultancy ToSpur, said the latest tightening measures implemented by authorities are a major cause for the drop in secondary-market prices.

The Shanghai government announced in November a new package of measures to curb local property prices. The package includes lifting down payments to 70 percent of the property price from 60 percent previously, if it's the buyers' second home purchase.

In late October, the Beijing government also rolled out a series of measures. Among other moves, the municipal government pledged to offer 20,000 units by the end of 2013 and said that another 50,000 units would be available in 2014.

These houses, targeting the urban "sandwich class", who cannot apply for more affordable public housing units, are 30 percent cheaper than private homes in similar locations. This is the first time that the government has emphasized moves to boost supply in its property control policies.

"Although in absolute quantity terms the supply of these houses is minor compared with the massive demand, the policy did help in stabilizing market expectations a bit," said Liu Weimin, a researcher at the Development Research Center of the State Council, China's cabinet.

Previous aggressive hikes in major cities' housing markets priced many buyers out of the market.

Also, a large portion of demand has been exhausted in previous buying sprees. These factors combined have prompted some analysts to predict that home prices in first-tier cities have already seen their ceilings for the short term.

In Shanghai, the significant number of deals made in the past three months has absorbed much of the demand, while other potential buyers are sidelined due to the unclear outlook, said Luo Yingshen, an analyst with Century 21 China Real Estate.

According to a recent report by the Chinese Academy of Social Sciences, home prices in China's largest cities might lose momentum as early as this quarter. Growth is expected to stabilize throughout the coming year and could even drop at the end of 2014.

However, most experts interviewed are doubtful that December's secondhand home sales figures are really indicative of home price trends for next year, citing substantial differences between first-tier cities' new and secondhand home markets.

The two markets also differ in terms of credit lines. Whereas loans offered for new home purchases are arranged at least a year before homes are handed to buyers, loans offered to secondhand buyers happen shortly before transactions. This means that, while credit conditions affect secondhand transactions immediately, new home sales were subject to credit conditions at least a year before the deal.

"The credit supply at the end of the year is usually tight, and that contributed directly to the cooler secondhand market. Whether this is a temporary phenomenon depends on the credit supply at the beginning of 2014. If credit conditions remain similar, then this could last," said Zhang Dawei, director of Centaline Property's research center.

Contact the writers at zhengyangpeng@chinadaily.com.cn and wang_ying@chinadaily.com.cn

(China Daily USA 12/26/2013 page13)