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Policy measures cool demand for new units with Guangzhou seen as next target of curbs
A slowdown in Shenzhen property transactions triggered by Beijing's latest policy measures to slow demand in the market has forced developers to reduce asking prices for new projects.
And property agents say the Guangzhou market is next in line for a policy-induced  cooling period.
'The asking prices of many new projects released in Shenzhen in October were 10 per cent lower than developers' original target prices,' Michael Choi Ngai-min, the chairman of Land Power International, told the South China Morning Post.
'Developers had been asking for prices for new releases that were 10 to 15 per cent higher than the launch prices of previous projects in the same area. But now asking prices are in line with the market,' Mr Choi said.
The impact of the policy was most marked in Shenzhen because it was the main target of the measures after prices  soared by 33 per cent in the first half - the highest growth rate  among mainland cities, he said.
The People's Bank of China and the China Banking Regulatory Commission announced a new mortgage policy on September 27 requiring property owners buying a second home to make a 40 per cent down payment, up from 30 per cent, and to pay a higher interest rate than first-time buyers. Agents said buyer concerns about more measures to come  dampened  demand.
Ellis Wong Hin-ming, a general manager at Centaline (China), said the primary market in Guangzhou was in a similar situation.
'Hong Kong developers are cutting the prices of their projects directly, but mainland developers are so far offering discounts,' he said.
For example, Hengda Real Estate Group pre-sold its residential project in the Huangpu district in Guangzhou in early October at prices ranging between 13,000 yuan and 14,000 yuan per square metre, said Mr Wong. But since mid-October, the developer has been offering a 3 per cent to 5 per cent discount.
Other developers have followed suit. China Overseas Land's Park Royale in Guangzhou was launched in July at an average price of 15,000 yuan per square metre. The developer had aimed to sell the remaining units in October at between 25,000 and 27,000 yuan per sq metre.
But the remaining units were marketed last month at an average price of 22,000 yuan per square metre. More than 60 per cent of the units were sold in a day at that price,  reflecting that demand at lower price levels remains strong.
In Shenzhen, before the latest round of measures, it was common to find that asking prices for new projects were 50 per cent higher than in the  secondary market, noted Andy Lee, a general manager of Centaline (China) in Shenzhen.
However, since market sentiment turned weak last month, he said, developers had been able to sell just 20 to 30 per cent of new releases within a week, whereas it was common  to sell 70 or 80 per cent of new  units within a day or at most a week in the first half.
In Shenzhen's secondary market, concerns over state policies had reduced the number of transactions of high-end housing estates by 70 per cent in October from September levels.
'That was because individual buyers were still not willing to cut their asking prices,' Mr Lee said.
'Potential home buyers or investors now worry that the mainland government may continue to introduce cooling measures in the property market,' he said.
Mr  Wong said transactions in the secondary market in Guangzhou were down at least 20 per cent in October because many individual flat owners were not willing to cut their asking prices.
According to the Shenzhen city government, the average  price fetched in new projects was down 10 per cent to 14,900 yuan per square metre in the first half of October, compared with September.
Mr Lee said  prices in Shenzhen  would drop at least 20 per cent from the peak in June, but  would remain higher than the average price earlier this year. The average price of new projects in June reached 15,000 yuan per square metre.



Developers cut prices of Shenzhen projects