The property bubble in Shanghai appears to be deflating with developers offering steeper discounts than normal to drum up purchases by first-time homebuyers.
To counter a 50 per cent slide in transaction volume in Shanghai so far this month, prices of flats at some projects on the city's outskirts are being cut by up to 0.7 per cent from the standard 0.2 per cent discount.
'It makes sense for developers to act fast as demand is drying up after banks tightened mortgage lending,' said Lee Wee Liat, a senior property analyst at Nomura International (Hong Kong).
Buyers at Qin He Yuan in Nanhui district, south of Pudong, will receive 0.7 per cent off flats while at Landsea Green Island in Baoshan, a 0.5 per cent discount is being offered to purchasers, according to mainland newspaper Oriental Morning Post. Units at the projects cost about 1.5 million yuan (HK$1.71 million) each.
Lee noted that the discounts in the two districts were reasonable as prices shot up 60 per cent last year, riding a red hot property market driven by loose bank lending.
The discount sale comes after banks in Beijing, Shanghai, Hangzhou and Nanjing reduced their preferential mortgage interest rates in an attempt to cool lending.
Not all developers are following suit in cutting prices.