(Yicai) Nov. 26 -- Cheaper-priced second-hand homes have become the main target of young buyers and investors in China’s first-tier cities, accounting for about half of pre-owned properties sold in Beijing and Shanghai last month.

More than 57 percent of the second-hand apartments sold in Beijing in October were priced at less than CNY2 million (USD278,600), up from 55 percent the previous month and nearly 53 percent a year earlier, according to data from China Real Estate Information Corporation.

In Shanghai, almost 49 percent of pre-owned home sales last month were of properties priced below CNY2 million, compared with over 46 percent in September and nearly 40 percent in the same period last year, the data also showed.

Small second-hand homes in first-tier cities are selling well because they meet the needs of young people buying a home in a major city for the first time, said Cao Jingjing, general manager of the index research department at the China Index Academy.

“Young people who have just entered work have limited funds, so the prices of these properties are relatively low, which won’t put too much financial pressure on them,” Cao said.

Homes at this price point are often located in areas with convenient commuting, established amenities, and big shopping malls and medical facilities nearby, making them popular among first-time homebuyers, she noted.

Falling resale prices are an opportunity for young buyers and working-class families. The pre-owned residential property market was still in the process of deflating price bubbles last month, according to a report by Shanghai-based E-House China Research Institute.

The index for pre-owned home prices in first-tier cities fell 1 percent from September and 4.5 percent from a year ago, according to the real estate think tank’s data.

Conversely, as property prices fall, rental yields on second-hand homes in some parts of first-tier cities is slowly recovering, attracting investors.

The average yield in 50 key cities rose to 2.08 percent in the first half from 2.06 percent last year, mainly because the scale of house price adjustments were greater than that for rents, according to data from the Linping Residential Big Data Research Institute.

A real estate agent in Beijing's Chaoyang district told Yicai that 15 to 20 second-hand apartments are sold every month in the community he handles. Many of the new owners rent them out because, after deducting costs, rental yields have risen to about 3 percent to 4 percent, he added.

Properties yielding more than 3 percent, or even around 4 percent, are still relatively rare, Lu Wenxi, market analyst at Shanghai Centaline Property Agency, told Yicai. However, against the backdrop of falling prices, some older properties may have relatively attractive yields due to larger price drops.

Lu warned that, as high-quality houses remain the favorites among buyers, the potential price appreciation of older properties is very limited. A high rental yield does not necessarily translate into better long-term investment returns, he explained.

Editors: Tang Shihua, Futura Costaglione