Developers in two minds over rebound
Mainland developers are caught in a dilemma. When sales rise, they don't know if they should rejoice that market sentiment has turned in their favour or be afraid that the government will introduce more cooling measures.
Last month, for example, property sales and prices rebounded after Beijing introduced cooling measures in mid-April, giving new hope for a market recovery. But that, in turn, led to widespread concern that the government might unleash another round of tightening measures to tame prices. And now, as September takes off - traditionally a month of heavy sales - developers are doubly worried.
'Buying interest has returned and there hasn't been any significant drop in home prices. We are now worried that a further rise in home prices might invite more government intervention,' Clement Luk, Centaline Property Agency's chief executive for the east and northeast, said.
More austerity measures, such as a property tax, are expected to be launched this year as Beijing tries to drag down property prices as part of efforts to avoid social unrest. Luk said potential buyers would retreat at the first signs of fresh cooling measures.
Of the 30 cities monitored by property website Soufun, 26 registered a month-on-month rise in property sales last month. Of these 26 cities, 11 recorded more than a 50 per cent rise by sales area from July, while month-on-month home prices in major cities saw a slight increase of 1 to 7 per cent.
Prices in first-tier cities have been growing steadily. Home prices in Shanghai rose 0.67 per cent last month from July, while Shenzhen's were up 6.95 per cent, Guangzhou home prices increased 6.58 per cent and Beijing's were up 5.4 per cent.
The rebound came after a three-month slump in property transactions after Beijing raised mortgage rates and minimum down-payment requirements amid mounting worries of an asset bubble and growing anger over sky-high home prices.
But Luk believes developers are unlikely to offer new projects at aggressive prices in the next two months. One developer, for example, plans to release its new project in Shanghai's outskirts, about 45 minutes from the city centre, in the next two weeks. It has registered more than 1,000 potential buyers for the 500 units on offer, with the first batch of units pitched at an average of 18,000 yuan per square metre - about 18 per cent below Shanghai's average selling price of 22,000 yuan per sq metre.
'Developers will shift to adopt a low-price strategy to attract market attention and raise prices for the succeeding batches when they get a strong response from the market,' he said.
In Beijing, property agents said 12 new projects would be put on sale this month. Kenneth Pak Kei-yuen, a senior general manager in the Beijing office of Midland Realty, said the market was dominated by end-users.
'Speculators have been eliminated by banks tightening lending for buyers of third homes. Prices will be maintained at this level as sales volume has not yet returned to this year's peak,' he said.
Andy Lee Yiu-chi, head of Centaline's Shenzhen branch, said prices in that city had bottomed out as buyers entered the market after seeing home values decline by as much as 10 per cent.
'Developers will price their new projects in line with the transaction prices in the secondary market in order to drum up sales,' he said.