Developers who were overly optimistic about the future of the mainland property market and bought land at premium prices two years ago are now paying for their rosy outlook.
Property prices in Beijing, for instance, have fallen by between 15 per cent and 20 per cent since the second quarter of 2010, when the central government began to roll out measures to curb demand and price growth, according to Centaline China data.
Developers which bought sites in major cities between September 2009 to March 2010 have suffered the most as properties fell to levels not seen since early 2010, one property agent said.
'Some of the land prices they paid are now close to the prices of built properties in nearby projects,' he said. 'At the time the buyers expected home prices would increase substantially, which is why they were willing to pay aggressive prices for the sites.
'If they were to launch their projects now they may record a loss, or at best a small profit, as their holding costs have been high and property prices have fallen significantly,' he said.
In 2010, China Overseas paid 22,409 yuan per square metre for a site in Shanghai's Chang Feng district - one of the highest rates ever paid on the mainland.
But finished flats in the area are selling for roughly 30,000 yuan per square Metre. Once construction and marketing costs are factored in, China Overseas may be hard-pressed to turn a profit when it sells the finished flats in the first half of next year.