After a five-year property slump, an increasing number of tenants in China’s biggest cities are opting to buy small flats with their years of savings, betting on a turnaround in the country’s home market that has yet to arrive.

However, the recent buying spree – centred on low-priced pre-owned homes – did not give banks’ mortgage loan businesses an effective boost because buyers raised their down payments to avoid interest costs.

“More tenants are feeling that paying a few thousand yuan a month to rent a flat is not worth it given the current low home prices,” said Li Tongqiang, a broker at property agency Lianjia in Shanghai. “They would rather spend 2 million to 3 million yuan (US$295,000 to US$442,500) to own a residential unit.”

Most of the buyers were first-time homeowners, Li said, adding the small homes they were looking to purchase were typically of less than 50 square metres (538 sq ft).

Pan Congqiang, 32, who recently bought a one-bedroom flat in Shanghai’s downtown Xuhui district, said he would rather own a home than pay 5,000 yuan a month in rent.

“The monthly instalment for repaying the mortgage loan now is 700 yuan lower than the rent,” Pan said. “I made the [purchase] decision quickly because of the gap.”

Centaline Property said homes priced below 3 million yuan made up 70 per cent of the company’s total transactions in April, compared with about 64 per cent a year earlier. The trend persisted last month.