Country Garden shares slump to 14-month low after angry homebuyers storm sales centre to protest price cuts
A decision by the developer to cut prices by up to 30 per cent sparked a wave of anger among buyers who had paid full price
Shares of Country Garden, mainland China’s largest developer by sales, slumped to a 14 month low on Monday, after video circulated on social media showing protesters mobbing at least one sales centre during the weeklong national holiday. They ended 6.7 per cent lower to close at HK$9.05 in Hong Kong, their lowest level since August 21, 2017.
Scores of protesters, some seen holding Chinese-language placards that read “return my hard-earned money”, others throwing rocks, mobbed a sales office for Xinzhou Mansion, a Country Garden residential project in Shangrao, Jiangxi. A decision by the developer to cut prices by up to 30 per cent sparked a wave of anger among buyers who’d paid full price.
A similar incident took place in Shanghai, where Country Garden slashed prices at its residential project One Mansion by as much as 25 per cent.
During the “golden week” national holiday, which kicks off on October 1, it is not uncommon for developers to roll out various incentives to lure buyers. These include discount coupons worth as much as hundred of thousands of yuan off that can be used to offset the price of a new home purchase, as well as referral schemes and outright price cuts.
Developers large and small are feeling downbeat amid signs the real estate market is starting to soften after a long period of growth.
The sell-through rate – comparing the units sold and the total units available in a new property project, indicating its popularity – declined in 11 cities in August and 16 cities in September, according to statistics from consultancy China Real Estate Information Corp (CRIC).
For nearly two years now China has been working on measures to cool the property market, with at least 90 introduced so far this year.
In a statement after the meeting of the Communist Party’s Politburo – made up of 25 of China’s most senior leaders – on July 31, officials said that while growth and stability would underscore the nation’s economic policies in the second half, they remained firm on “containing home price gains”, although they removed the word “excessive” from the phrase used in the previous policy stance.
In an indication of the depressed state of the property market, China Vanke unveiled the slogan “to survive” during a two-day conference in Shenzhen that ended on September 29.
Country Garden cut the selling price at one of its residential developments by 1/3. Those who paid full price smashed the sales office. Similar incidents had happened before, and will again. It’s impossible to remove “the guarantee of principal”（刚性兑付）in China. pic.twitter.com/UxHFODYxmc
— Hao Hong 洪灝, CFA (@polarmcbear) October 6, 2018
Moody’s expects that mid and large-sized developers that can manage growth while showing strong execution and financial discipline will withstand the tough operating conditions over the next 12 months.
“Current discounts within 10 per cent are more like a market gimmick,” said Raymond Cheng, head of Hong Kong and China research at CGS-CIMB Securities. “If the October data shows a sharp drop, we will see a real price drop, higher than 10 per cent.”
Meanwhile, small industry players will be hit the most if the downturn deepens.
“Tight credit conditions in China will reduce their sales levels and access to funding, and materially increase funding costs,” said Celine Yang, an analyst with Moody’s.