Shenzhen agents cool their heels despite peak season

Developers in Shenzhen look set to defer their high season project launches as tighter mortgage lending and concerns about further property cooling measures cloud buying sentiment, say property agents.

'This month and next month are traditionally the peak season for flat sales, coinciding with the end of the summer holiday and the national 'Golden Week' holiday. But some developers have still not applied for pre-sale permits in view of market uncertainties,' said Gerry Xu Feng, chief officer of the research department at Midland China's Shenzhen branch.

There are 17 new projects or 5,500 units ready for pre-sale this month and next, down 30 per cent from a year ago, according to Midland's estimation.

'A new project used to be sold out within three or four months but now it take more time as homebuyers have become more cautious,' Ms Xu said.

Hit by the reluctance of banks in Shenzhen to grant mortgage loans to homebuyers, market sentiment had soured, she said.

Sales in the primary market were down 30 per cent last month from August last year at 4.1 billion yuan, and the number of transactions fell 40 per cent to 2,500 units or 220,000 square metres, she said.

This month's key forthcoming sale projects are China Overseas Land and Investment's 1,610-unit Dashandi, the 1,419-unit Zhujiang Xu Jing Jia Yuan, and the 1,354-unit Hong Fa Ling Yu. Projects such as the 816-unit Hua Luen City in Nan Shan, and the 560-unit Jin Shui Wan Yu in Yan Tin will be ready next month.

Michael Choi Ngai-min, the chairman of Land Power International, said in May and June new projects easily sold out 70 per cent to 90 per cent of the total units on the first day of their launch.

'But those good days are unlikely to be repeated,' Mr Choi said. 'Then, potential homebuyers were fighting each other in order to buy an apartment before prices rose further. Now, a project with 500 units put on sale only manages to dispose of 150 units on the first day, a big drop from 400 units previously.

'Sales have slowed significantly.'

The tepid response from buyers was also due to the rapid rise in home prices in Shenzhen, where average prices had jumped 30 per cent in the first half of this year, with some new luxury projects increasing 40 to 50 per cent.

'The market needs to take a breather after a sharp rise,' he said, adding that some developers had offered their units at 5 per cent to 10 per cent discounts to the market transaction prices.

Lai Kwok-keung, a director of Centaline China's Shenzhen branch, said stricter lending criteria by banks had affected sales.

'But the market will become clearer in October after buyers make up their minds about whether there will be further measures to check rising property prices,' Mr Lai said.

'At present, home seekers are adopting a wait-and-see attitude as they believe home prices will be greatly influenced by government policies.'

However, he said developers had sound financial status and would not reduce their prices despite slow sales responses. 'They are not in a hurry to offload their units. August was an abnormal month as so many measures were aimed at regulating the property market,' he said.

Mr Lai said it was unlikely banks would shut off credit for a long time, saying that market sentiment would improve once financing returned to normal.