Developers offer incentives to boost sales in Hangzhou

In Hangzhou, there could not have been a better time to buy a home. Last month, housing prices dropped the most among 70 mainland cities, forcing developers to come out with incentives to entice buyers.

With a total inventory of 120,000 unsold homes in the city, the likes of Shimao Property Holdings, Poly Real Estate Group, Greentown China Holdings and Gemdale Properties and Investment Corp are offering creative incentives to bolster sales.

"The main reason why developers are offering incentives rather than direct price cuts is to protect their brands and avoid a backlash from existing homeowners," said Johnson Hu, a property analyst at CIMB. "But to move sales, more such efforts or price cuts are needed.

"The market is yet to see the bottom in terms of price trend."

Shimao is offering buyers of its New West Lake project annual rental subsidies of up to 12,000 yuan (HK$14,945) as they wait for delivery.

Poly Real Estate is allowing buyers of its two projects, Luolanxiangju and Hutongyu, to defer the 30 per cent down payment for a year after signing the purchase agreement.

The highly geared Greentown is giving away coupons worth 200,000 yuan to its 150,000 existing customers to encourage them to buy more flats.

Last month, Greentown chairman Song Weiping and his wife Xia Yibo and chief executive Sho Bainian sold 24.3 per cent of the firm to Sunac China Holdings for about HK$6.3 billion.

To promote its Shenhuali residential project, Gemdale is asking buyers to put down 10 per cent as initial payment and 20 per cent in three years. The project mainly caters to first-time buyers, with flats priced at about 2 million yuan each.

The generous packages from developers come amid Hangzhou's increasingly overbuilt problem. Last month, home prices in the city fell 1.4 per cent from a year earlier, double the pace of the 0.7 per cent drop in April, according to the National Bureau of Statistics.

Some developers in the city started cutting prices for the first time this year. Some projects in the outskirts are now going at nearly a third of the original price. The price war between developers has even spread to second and third-tier cities nearby.

"But most developers are providing incentives rather than plain discounts because they don't want to give the impression that home prices are fragile. Incentives are probably a good way to attract the attention of potential buyers without upsetting existing buyers of previous launches," said Alan Jin, an analyst at Mizuho Securities.

"The incentives also indicate developers' eagerness to churn out volumes, rather than just sell. Had they been desperate to sell, they would have cut prices straightaway rather than provide indirect discounts."