**MNI INTERVIEW: China Home Sales May Hit Record High: E-House

--Robust Demand in Third- and Fourth-Tier Chinese Cities 

--Developers Eager to Boost Sales and Cash Flow

     **BEIJING (MNI) - Property sales in China may hit a record high this year

as stronger purchase incentives offered by developers offset curbs imposed by

the government, a leading real estate researcher told MNI in an exclusive

interview.

     "We may well see a small growth that takes sales to record high, or at

least matching last year's level," said Cui Ji, a manager at the E-House Real

Estate Research Institute, a division of NYSE-listed E-House Holdings Ltd. 

     Demand for housing, particularly in smaller cities, has been robust in the

first half, and shown no sign of abating, said Cui, a property industry veteran

with more than a decade of experience. Developers are accelerating new offerings

to generate cash flow and meet funding shortages, Cui said. 

     Cui's projection contrasts with other analysts' that government curbs on

the property market will lead to a drop in sales. S&P Global Ratings said in

April that Chinese property sales in 2018 may drop as much as 5% from last year

as sales in lower-tiered cities, which drove the growth of the sector last year,

is unlikely to be sustained.

     Cities in the so-called tier-3 and tier-4 smaller regional centers saw

strong sales growth recently, especially in March and April, a period which

often serves as the bellwether for the whole year. According to E-house, sales

of the 18 cities in this category monitored by the institute rose 3% in the two

months from a year ago.

     --RESTRICTED LENDING

     Last year, China's property sales volume rose 7.7% from 2016 to 1.69

billion square meters, while the total value increased 13.7% to CNY13.17

trillion, both highest ever.

     The Chinese government has ordered banks to restrict lending to property

companies and significantly scaled back the amount of bonds they may issue on

the domestic market, hoping reduced funding would limit frenzy of property

investment and curb a property bubble. Instead, developers sold bonds to markets

outside China.

     In the first four months, the amount of funding obtained by property

companies from offshore markets doubled from a year ago to $23.32 billion,

according to Centaline Group, a property service company.

     Regulators are trying to catch up. The State Administration of Foreign

Exchange, the country's FX regulator, said in mid-April that property companies

will be forbidden to borrow offshore except when approved by the government.

Given that many developers are under increased refinancing pressure this year,

they are expected to use more promotions and price reductions to boost sales in

the coming months, according to analysts. 

     --MORE URGAN RESIDENTS

     Chinese local governments are using policies to draw talents, thus giving

permission for them to buy houses in the cities.

     Xi'an city, the capital of Shaanxi province, for example, saw a surge of

244,978 new residents in the first quarter, after the city issued at least four

rounds of new preferential policies to "attract talents".

     "It may be a way to circumvent restrictions placed by the government,"

Zhang Hongwei, director at research department of Shanghai-based Tospur

Consultancy told MNI. However, Zhang doesn't see enough such demand to boost

sales to record.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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