The loosening in cities such as Shanghai, Hangzhou, Nanjing and Xiamen has led to a surge in the marketing of new home developments over the past two months, with developers also eager to ramp up the launches to boost their cashflow.
"Both factors will lead to an obvious rise in housing supply in the top cities in the second quarter," said David Hong, the Hong Kong head of research at CRIC, a real estate research firm.. "Many developments which have already reached the pre-sales requirements last year will be launched into the market."
Pre-sales refer to the selling of homes in housing developments before they are ready to occupy, and often before the construction has been completed.
The changes highlight competing interests between China's stability-minded central government and revenue-hungry local authorities, as well as the challenges in artificially containing a still hot market that has remained a one-way bet.
The mild loosening is city specific, according to nine developers interviewed by Reuters, and there is little expectation of a nationwide easing in curbs anytime soon. Developers said, for example, pre-sale approvals remain extremely strict in Beijing because it is closely monitored by the central government.
But real estate experts said it could be a sign of things to come elsewhere in the country as the cities, relying heavily on land sales and property taxes, try to boost real estate sales and keep housing supply in line with demand.
Any relaxation should bolster the developers' profitability and could help to support economic growth at a time when there are fears it could be flagging, though if it is restricted to only a few cities the impact will be modest, economists and analysts said.
The pent-up demand for land development is high as Chinese cities sold a record 5.2 trillion yuan worth of land usage rights in 2017, up 40.7 percent from a year earlier, data from the finance ministry shows.
The Ministry of Housing and Urban-Rural Development (MOHURD) did not respond to faxed requests for comment. The housing authorities in Shanghai, Nanjing, Xiamen and Hangzhou didn't answer calls from Reuters.
The official Xinhua news agency reported last week that MOHURD has reiterated that policies to control home prices and prevent speculative investment in the property market will not be changed or loosened.
PRICES STILL RISING
The latest housing price data for March shows that average new home prices rose for their 35th consecutive month, with more cities reporting growth, though the annual price appreciation has dropped to 4.9 percent in the latest period from a record 12.6 percent in November 2016. The next monthly figures, for April, are due out on Wednesday.
But China's official housing data has been criticized for being artificial – local authorities can have an impact on the figures by setting price caps and changing home sales and purchase approval speed so that they aren’t seen to be undermining Beijing’s policies.
"To stabilise prices, the local government has been delaying approvals for expensive projects until there are enough cheaper projects to offset such price gains," said a government source in Hefei, the capital city of Anhui province, who declined to be named because of the sensitivity of the issue.
In Shanghai, pre-sale permits approved in March and April alone totalled 47 for an area of 1.74 million square meters, almost 50 percent of the figure for all of last year, according to CRIC, suggesting the pace of new developments is picking up.
“We expect more flexibility in price setting in some first- and second-tier cities,” said Eva Lau, investor relations manager for Shanghai-based Shimao Property, which is among the top 20 developers in China in terms of sales.
One developer, who declined to be named given the sensitivity of the topic, said Shanghai and Nanjing are two cities it has seen some loosening recently.
"In Nanjing, the authority came to us and asked if we would launch the project if they raise the approval price by 1,000 yuan," the developer added, citing a 5 percent increase in the medium-sized apartment sales prices by an average 20,000 yuan.
And another developer, that has recently launched new apartments in Shanghai, said some pre-sale approval requirements in place since last year - such as allowing developers to apply for each sales permit only after building more than 30,000 square meters - have been removed. The easing allows developers to start selling more quickly.
February inventory levels in Shanghai dropped to 4.9 months, compared to 7.8 months a year ago, while Nanjing was only 3.8 months, versus 6.7 months a year ago, according to CRIC. Figures lower than six months indicate that the market is undersupplied, CRIC's Hong said.
Recent approval prices have also crept higher in second-tier cities, such as Xiamen and Hangzhou. One Hangzhou-based developer said the eastern city has unofficially stated that if sales registration for a development is suspended for three months, developers can then raise the price by up to 20 percent.
Aside from the official restrictions, the developers last year held back sales of some prime projects in the hope that prices would soon start surging again, but those hopes have since dimmed.
"Developers don't want to wait anymore," said a Shenzhen-based developer.
"When people see there's a pick up in the speed of sales permits, then they push out new launches faster for cash collection."
Developers were also more willing to make concessions in the pricing of luxury projects, after Shanghai resumed pre-sale approvals this year, a move that developers and property analysts said was able to be made given a relaxation of political sentiment after the Communist Party Congress last October.
At least seven luxury projects with prices over 80,000 yuan per square metre were approved for pre-sale in April, but the approved selling prices were lower than the secondary market, where no price caps are imposed.
"Our approved selling price was around 95,000, compared to 110,000 in the secondary market," said an official at one of the Shanghai developers, also in reference to the price in yuan per square metre. "The price cap has a larger impact on us since we're a high-end developer, but we can't keep the projects indefinitely."
(Editing by Martin Howell)
By Clare Jim and Yawen Chen