Guangzhou developers fight for sales in slow market

Along the one-kilometre stretch of Kaiyuan Avenue in suburban Guangzhou, one can feel the hot breath of intense competition between the top mainland developers in a cooling property market.

At the end of the road, Yuexiu Property, a Guangzhou-based state developer, offered some units at holiday discounts of up to 20 per cent. At the beginning of the road, China Overseas Land & Investment, the country's biggest developer by market capitalisation, was selling smaller two-bedroom flats at a similar price.

In between, China Vanke, the mainland's largest developer by sales revenue, was trying to sign up as many clients as possible even though its project has yet to get pre-sale approval.

The showrooms were full of families yesterday afternoon when this reporter visited, some of them with children and others with retired parents, even though these projects are a good half an hour's drive from downtown.

Despite the big crowd, Ma Wenshuai, director of property consultancy at World Union, said: "There are no signs of a pick-up yet.

"Developers and potential home buyers are still in a tug of war," he told the South China Morning Post.

The three-day May Day holiday, which ends today, is regarded as key to reversing weakening sentiment this year. It has, in the past, given developers a shot at notching up strong sales.

This time, sweeteners are aplenty but most discounts are less than 5 per cent and not generous enough to convince buyers to plunk down their money for immediate purchases.

"Yuexiu's special units are very attractive, at around 1 million [yuan] per two-bedroom flat," said a young woman in her 30s who gave her name as Song Lili. She had waited a few hours for the release of the special apartments. She added: "This will be a different place in a few years with the operation of a metro line."

Luogang district, where the three projects are located, saw a larger supply of new homes than the central areas of Guangzhou during the holiday. It is a booming town in the eastern part of Guangzhou and demonstrates China's efforts to replace low-end manufacturing with hi-tech industries.

The government plans to invest tens of billions of yuan to improve infrastructure such as roads and metro lines here. Scores of shopping malls will mushroom in a few years.

A large piece of land in Luogang is scheduled to be auctioned soon. But competition is not expected to be as intense as last year because developers are tightening their belts after sales slid in the first four months of this year. Last week, a land auction in the city's central Tianhe district attracted only two bidders.

Cities suffering from an oversupply of homes such as Hangzhou and Wenzhou in Zhejiang province are expected to relax home purchase restrictions soon to stimulate demand and support local government budgets.

"In the coming months, we think local governments may relax the property restrictions if the property sector weakens further," Wang Tao, the chief China economist of UBS in Hong Kong, said in a research note.