Real Estate

Has China dodged property Armageddon again?

Remember all those worries about a China property crash? Forget all that. Analysts are turning freshly positive on the mainland's listed property plays.

"National property sales in April are likely to record the first year-on-year increase in 2015, pointing to a potential bottoming-out," Barclays said in a note Monday, citing data showing home sales in 32 cities tracked by the bank rose 28.3 percent on-year over April 1-28. "Chinese property bond yields have also declined sharply, suggesting that investors are becoming less concerned over developers' cash-flow positions, and we believe lower market risk premiums are warranted."

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Valuations in the sector's stocks are "still quite attractive" at around 9.4 times earnings for Hong Kong-listed plays, Barclays said, noting the last two sector rallies resulted in gains of 110-258 percent. It upgraded Longfor, Agile and Greentown to Overweight.

China property plays are already rallying, with the Hang Seng Property index up around 20 percent so far this year – and around 2.4 percent mid-trade Monday – and the Shanghai Property subindex up around 3.9 percent midday Monday, totting up gains of around 42 percent so far this year. That compares with the Hang Seng Index's around 20 percent year-to-date gain and the 's around 38 percent rise over the same period.

Some individual stocks surged Monday, with Hong Kong-listed Evergrande jumping 7.9 percent and Shimao climbing 8.3 percent in mid-session trade.

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China's property sector is closely watched as it contributes an estimated 15 percent of the mainland's gross domestic product (GDP), with many analysts pointing to concerns over the potential for overbuilding to spur debt defaults among developers.

"A core feature of any bear case on China is the softening property market," Bernstein analysts said in a note last week. "Abandoned apartment buildings in central China, developers with years of unsaleable inventory and falling property prices across the board are all part of a bleak mosaic of the slowdown in the property sector turning into a collapse."

But Bernstein noted that despite the mainland's economic slowdown, property prices have fallen only around 5.4 percent over the past 12 months, while they remain up around 16 percent compared with five years ago.

"If the Chinese property market was going to be the trigger for a meltdown in the Chinese economy, it isn't happening or it hasn't happened yet. The best explanation is, on a longer term view, the market is still attractive," Bernstein said.

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Greentown China and Shimao appear best-positioned for the urbanization trend toward fewer, larger east coast cities, while Poly Property may be too heavily focused on the wrong parts of the country, it said.

Mainland property players have gotten a boost recently, as Beijing moved to ease monetary policy to counter an economic slowdown, including the People's Bank of China's (PBOC) moves to cut its reserve requirement ratio (RRR) for banks.

Those steps could lead to as much as 1 trillion ($160 billion) of fresh bank credit for the sector this year if the PBOC cuts the RRR further, Reorient Research estimated in an April note.

Others are also positive on China property stocks.

"Both property physical market and stock prices have bottomed out," BNP Paribas said in a note last month, rating the sector at "improving." It expects more supportive measures will boost transaction volumes, including lowering second-home purchase down payments, banks easing lending to homebuyers and easing restrictions on using provident funds for home purchases.

BNP Paribas expects the sector stocks will continue rising with earnings improvements to come in 2016. Its top picks are among mid-cap plays, preferring KWG, Shimao, R&F and Longfor.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1