Chinese wait for price cuts as property slowdown accelerates
With the mainland property market softening, developers' incentives are failing to clinch sales
Langi Chiang and Celine Sun in Beijing
Sweeteners were aplenty at the Beijing Spring Real Estate Trade Fair last week. But Zhao Xiao wasn't biting.
"Many property developers are offering small incentives but I'd rather wait a bit longer to see where prices are going," said the office worker as he checked out what was on offer at the four-day property event where developers flocked to showcase a record 600 projects.
Like Zhao, many prospective homebuyers on the mainland are staying on the sidelines, forcing developers to cut prices.
About 2,000 kilometres away in Chengdu, several hundred people gathered at Wharf's sales office to protest against a steep price cut by the Hong Kong developer in a local project. The price cut erased almost a third of the value of homes these people had bought just a few months ago, mainland media reported.
Such incidents are on the rise as the mainland property market cools down, often as a result of credit tightening, fuelling worries of the real estate bubble bursting and taking down with it the rest of the economy.
The 70-city home price data released yesterday by the National Bureau of Statistics gave more evidence of a downturn. This came on the heels of the widely awaited economic growth data on Wednesday that showed contracting property sales and construction had dragged down gross domestic product expansion in the first quarter to its slowest pace since 2012.
Annual property inflation eased for a third straight month in March, with Shanghai leading the pack at 15.5 per cent, compared with February's 18.7 per cent. Prices in Wenzhou, where prices have been falling for 2½ years now, dropped another 4.2 per cent last month compared with March last year, yet again confirming that small cities are at a greater risk.
In month-on-month terms, prices of new homes dropped in four cities in March, as they did in February. But they rose in March from the previous month in 56 cities, compared with 57 in February.
Weakening data and market anticipation that worse is to follow in recent weeks have fuelled talks of a relaxation in the housing policy, although there is no official word on the matter so far.
Fujian is among the provinces where rumours of an imminent government intervention has been rife, but an official at the housing bureau denied media reports of the province initiating measures to boost the real estate market.
"We have always adhered to the country's macro control measures," the official told the South China Morning Post. "We have never issued such a document [as reported by the media]."
Zhu Ping, an analyst from consultancy Shanghai Deovolente Realty, said: "Recent rumours about housing policy relaxation in some cities have pushed more homebuyers to hold cash and wait. Developers will probably have to rely mainly on price cuts to boost sales in the following months."
That is just what Zhao Xiao is hoping for.