(Yicai) April 21 -- Shanghai and Shenzhen will be the first Chinese cities to experience a recovery of the property market after bottoming out this year, according to US investment bank Goldman Sachs.

Shanghai and Shenzhen have shown the strongest competitiveness in the four core factors driving the real estate market -- population structure, income level, affordability, and supply -- so the recovery will happen six to 24 months earlier than other first- and second-tier cities in China, Goldman Sachs predicted in a recent report.

Even though rental yields in the two cities are still lower than mortgage rates, their spreads are at the lowest levels in the past decade, Wang Yi, a chartered financial analyst at Goldman Sachs, told Yicai. Similar to Hong Kong, the wealth effect brought by the stock market momentum will also be a key driver of the property market recovery, Wang added.

House prices in Shanghai and Shenzhen are expected to rise by 15 percent over the next three years, Goldman Sachs also forecast.

The recovery signal of the real estate market in Shanghai and Shenzhen has already emerged in second-hand house transactions. In March, 31,215 pre-owned homes were sold in Shanghai, the highest since March 2021, while second-hand home sales in Shenzhen surged 151 percent to 7,225 units from February, according to statistics from the local property institutions.

In comparison, the national real estate market declined in the first quarter despite slowing down. In the three months ended March 31, China's new home sales plunged 16.7 percent from a year earlier, with the sales area down 10.4 percent, per data from the National Bureau of Statistics. The figures compare with declines of 20.2 percent and 13.5 percent, respectively, in the previous two months.

Mortgage data, which is closely related to the performance of the property market, also showed signs of recovery in the first quarter. Chinese yuan-denominated loans increased by CNY8.6 trillion (USD1.3 trillion) from a year earlier, of which medium- and long-term household loans surged by CNY460.7 billion (USD67.6 billion), according to data from the People's Bank of China.

Since the beginning of March, mortgages have risen significantly, which should be a signal of stabilization in the real estate market, Zhou Wanfu, vice president of Bank of Communications, said at the lender's annual earnings conference last month. If this momentum can be maintained, this year's mortgage data will reverse the downward trend and gradually achieve growth, he noted.

The total balance of personal housing loans at BOCOM and China's five other major state-owned banks decreased by about CNY700 billion to CNY25 trillion (USD3.7 trillion) as of Dec. 31 from a year earlier, according to calculations based on data disclosed by the banks in their annual financial statements.

Editors: Dou Shicong, Futura Costaglione