By Casey Hall and Clare Jim

SHANGHAI (Reuters) – Property sales soared in some Chinese cities during the week-long National Day holiday after a slew of stimulus was unveiled to support the market, but analysts warn it is premature to call it a solid recovery yet as further stimulus may still be needed.

Just days before the Golden Week holiday began on Oct. 1, policymakers announced a cut soon in mortgage rates for existing home loans as part of a package of measures to stabilise declining sales and prices in the beleaguered sector.

China’s property market has been in a slump since 2021 after a string of cash-strapped developers defaulted on loans, leaving behind large inventories of new homes and unfinished projects that have dragged on the broader economy and sapped confidence.

During the holiday period, the number of house visits, which reflects a willingness to buy a home, increased significantly, while sales of homes in many places rose by “varying degrees,” state broadcaster CCTV reported on Saturday.

More than 50 cities introduced policies to boost the real estate market, while nearly 2,000 developments from more than 1,000 property companies participated in promotions, the report said, citing the Ministry of Housing and Urban-Rural Development.

The southern Chinese city of Shenzhen was among the major cities that saw the biggest improvements in sentiment, according to local media, property agents and J.P. Morgan.

Between Oct. 1 and 3, the number of homes in the secondary market sold through Shenzhen Centaline Property Consultants rose 233% year-on-year, and new home sales jumped 569%, the agency said.

In Shanghai, applications to buy new flats at many real estate projects hit new highs, local media reported, with some projects seeing subscription rates reach over 80% to 90%.

During the first three days of the holiday period, 345 groups visited one development by state-backed China Resources Land in suburban Shanghai and 46 units were sold, with sales reaching 261 million yuan ($37.2 million), according to local media.

Realtor Leyoujia said its branch in Shenzhen recorded a 979% year-on-year rally in new home transactions during Sept. 30 to Oct. 6, while deals in the secondary market rose 298%, Shanghai Securities News reported.

“We think the positive sales momentum for these cities should … suggest that property sales in other cities … could also see some recovery in the near term on the back of strong policy support and improved market sentiment,” said Raymond Cheng, head of China property research at CGS International Securities.

More comprehensive sales data for the Golden Week holiday are expected to be released by private survey companies in the next few days. They will compare with a 17% drop in average daily home sales during the same period a year earlier.

The Golden Week holiday is traditionally a peak period for new-home sales in China, with developers offering promotions and releasing new properties.

Cheng expected China’s property sales could show positive growth in the fourth quarter.

But J.P. Morgan analysts cautioned that the momentum remains weaker than when the economy reopened after the pandemic in the first quarter of 2023.

“For the next few weeks, a solid improvement in sales is more a knee-jerk reaction after policy easing. To determine whether the market is bottoming out, November sales would be key,” they said in a note on Monday.

They also said that low-tier cities, where the property glut is more severe due to declining populations and the weaker financial health of many local governments, did not see a pick-up in demand yet.

China may need 3 trillion yuan ($427.50 billion) in funding to run down excess supplies of homes in 80 large cities and may continue to rely on banks or its central bank to facilitate the programme, UBS analysts estimate.

“We expect the latest economic data to suggest continued weak momentum, although daily property sales in early October and Golden-Week holiday consumer spending may have improved,” UBS said in a note on Monday, adding it expects an announcement of a sizable fiscal package in the coming days.

($1 = 7.0176 Chinese yuan)

(Reporting by Casey Hall in Shanghai and Clare Jim, Donny Kwok in Hong Kong; Writing by Miyoung Kim; Editing by Jacqueline Wong)

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