Developers expected to slash house prices to ease housing inventory oversupply
Rising housing inventory and sluggish sales are expected to force the hand of property firms needing to clear stock amid slump, analysts say
An increase in the mainland's home inventory in the first half could lead to price cuts of 15 per cent or more in the next six months, say industry analysts.
Many developers have already announced 10 to 20 per cent increases in contracted sales for this year after a stellar performance last year, but found conditions tough in the second quarter.
"For the market to recover, developers would have to cut prices and credit policy would need to be relaxed," said Liu Wenchun, head of research at property consultancy Worldunion in Shenzhen.
She said she saw signs of banks speeding up mortgage approvals and the possibility of developers cutting prices by more than 15 per cent in the second half, from less than 10 per cent in the first.
For the market to recover, developers would have to cut prices
According to Liu, it has been taking longer to sell mounting property stock in recent months as sales slow. The average destocking period in the top 10 cities monitored by Worldunion stood at 17.8 months at the end of May. The previous peak was during the 2011-2012 downturn, when the average hit 18.4 months.
The destocking period was 11 months in the four first-tier cities Guangzhou, Shenzhen, Beijing and Shanghai at the end of May - 53 per cent longer than that a year earlier, consultancy E-House (China) said. It was up 40 per cent to 12.7 months in second-tier cities, mainly provincial capitals. In the eastern port city of Qingdao, it now takes as long as 35.8 months to clear inventory.