• Sat
  • Dec 20, 2014
  • Updated: 9:41pm

Developer slashes prices by a quarter

PUBLISHED : Saturday, 02 June, 2012, 12:00am
UPDATED : Saturday, 02 June, 2012, 12:00am
 

Agile Property Holdings yesterday started offering up to 25 per cent discounts on its flats in 10 of its projects in Guangdong province, a trend which is likely to spread as more developers slash prices to stay afloat amid a tight credit environment.

The Guangdong-based developer said the offer would last 20 days.

A company spokeswoman said the discount offer was only part of the marketing campaign to commemorate the company's 20th anniversary.

'It has nothing to do with the slowdown of the property market,' she said. Six of the 10 projects - including Metro Agile Zhongshan, Agile Baron Hill and La Cite Greenville - are in Zhongshan city.

The company did not say how many units were on discount, but the spokeswoman said it would not make a major difference to the company's bottom line.

This is one of the biggest price discounts from a listed developer in recent months. In February, China Merchants Property cut prices by about 20 per cent on 22 developments across 14 cities.

According to property consultant DTZ, lending to developers remains tight as the central government refuses to ease the curbs in place to rein in what was once an overheated property sector.

Property development loans and personal new-home mortgage loans in April amounted to 90.2 billion yuan (HK$110.2 billion) and 64.4 billion yuan, down 25.02 per cent and 3.45 per cent month on month respectively, DTZ says in the latest research report.

'Although development loan levels may not further deteriorate ... more developers may not want to wait and instead, opt to slash their home prices to keep afloat,' Alan Chiang Sheung-lai, head of the residential sector, said in the report.

As a result of sluggish sales, the unsold inventory of new homes continued to grow last month. In DTZ's 10 sample cities, unsold inventory has particularly shot up in Wuhan, Shenzhen, Xiamen and Shenyang.

As of April, Wuhan would take 17.1 months and Shenzhen 14.2 months to absorb the current unsold stock based on prevailing prices.

Xiamen and Shenyang would take 11.3 and 10.8 months respectively, said DTZ.

On the back of aggressive price cuts by developers, Mizuho Securities Asia has cut its earnings forecast for the sector by an average 2 per cent for the 2012 financial year and 6 per cent for the 2013 financial year.

Both transaction volumes and prices will edge lower over the summer months, said Alan Jin, a property analyst at Mizuho.

Jin said developers' cash flow will continue to be stretched due to the stringent lending policy vis-?vis the property sector and still-tight overall liquidity, thin transaction volumes and increased repayment pressure.

Mizuho estimates the sector will need to repay 2.6 trillion yuan of borrowings this year, 30 per cent higher than last year.

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