Developers pin hopes on recovery in 2013
When property developer Cheng Lixiong read reports about remarks made by Premier Wen Jiabao at the opening of the annual parliamentary session this week, he knew there would not be a recovery in the nation's housing market this year.
Now the chief executive of Glorious Property Holdings is counting on the incoming administration to breathe new life into the market next year. 'We don't believe there will be any major relaxation of cooling-off measures under this administration,' Cheng said.
At the opening of the National People's Congress on Monday, Wen said Beijing would continue to regulate the market to bring down property prices to a reasonable level.
Tensions between the central and local governments are escalating over the ongoing curbs on the property market. At least 17 cities have reportedly begun a tentative relaxation of the curbs imposed by Beijing, in order to boost their revenue from property transactions.
Measures in force since 2010 include higher down payments, higher loan interest rates, a restriction on the number of homes a buyer can purchase, trials of a property tax, and the construction of low-income housing.
As a result sales have plunged across the mainland; in all 70 major cities monitored by the National Bureau of Statistics, new- home prices did not rise in January. In the meantime, developers are starting to suffer a liquidity crunch because of slowing property sales and curbs on mortgage lending.
'We now hope the new administration will give us some good news - a gift to celebrate the start of the new regime,' said Cheng. Xi Jinping, vice-president and vice-chairman of the Central Military Commission and heir-apparent to President Hu Jintao, is likely to take over next March.
Cheng's forecast is in line with other mainland developers.
'Developers expect tough times for the market to continue throughout this year,' said an executive of another Hong Kong-listed mainland developer, Longfor Properties. Before developers see an improvement, they would try different methods to ensure they were not driven out of the market, the executive said.
Price-cutting is likely to become common. The first shots were fired when Poly Real Estate Group launched a preferential price offer for 100 projects in 40 cities in January. China Merchants Property cut prices by as much as 20 per cent or more in 22 developments in 14 cities.
Cheng said Glorious Property had delayed construction and slowed the pace of land acquisition in the face of liquidity pressures. Rather than offering big price cuts, Longfor Properties would prefer to cut the size of its homes to make them more affordable, said a company executive.
'In the past, a detached house of around 300 square metres cost several million yuan. Now we sell a detached house of below 200 square metres for a reduced price of around 1.5 million yuan [HK$1.84 million],' the executive said.
Feng Huiming, of Shenzhen-based developer Fantasia Holdings, said it had other options before considering price cuts. 'We will not rely only on property agents to sell our properties. When we sold commercial properties, for instance, we contacted lawyers' associations directly to market our product and the initial response was not bad,' Feng said.