HSBC Research reports that rising second-hand property sales in the Mainland market have led to a gradual stabilisation of prices. Second-hand house prices in Beijing, Shanghai, Hangzhou and Nanjing showed month-on-month growth in June, reversing six consecutive months of declines, implying a first phase recovery, with the bank expecting domestic house sales in September Sales will resume year-on-year growth. At the same time, of the eight major cities tracked by the group, five cities recorded higher month-on-month sales in July.

The bank believes that sales of first-hand homes have slowed from July to date, but that is expected, as developers offer preferential terms at the end of June and buyers are waiting for more support policies.

In addition, the bank said that in-house financing was smoother and cheaper, and Yuexiu Properties (00123.HK) recently issued new 5- and 10-year onshore bonds at historic lows of 2.25pc and 2.75pc, bringing a positive surprise to the market and lowering the cost of effective financing. Low interest costs allow quality developers to improve their debt status and continue to invest in land.

THE BANK PREFERS DOMESTIC DOMESTIC HOUSING STOCKS, RECOMMENDING CHINA OVERSEAS (00688.HK), RUNDI (01109.HK), YUXIU AND GREENCITY CHINA (03900.HK), ALL WITH “BUY” RATINGS (SEE SEPARATE TABLE), SAYING THEIR RISK RETURNS HAVE BECOME MORE ATTRACTIVE, WHILE PREFERRING REAL ESTATE AGENT SHELL (BEKE.US)), also rated “Buy”.