China home prices heading for a fall

ANALYSTS expect property prices in China's major cities will start to fall next month, weighed down by an increase in the supply of new flats.

Prices have so far not followed the steep decline in sales' volumes. New home sales in Beijing, for example, dropped 30% in June from May as more new projects came on the market, according to Dickson Wong Hung, chief executive at Centaline Property in Northern and Southwest China. "Property sales continued to fall last month. But property prices remain stable," Wong said.

Quoting data from the Beijing Municipal Commission of Housing and Urban-Rural Development, consultancy Jones Lang LaSalle said that in terms of gross floor area, aggregate sales in the capital dropped 35.9% to 459,755 square metres in the second quarter from 717,049 sq m in the first quarter.

But the average price of high-end residential units in Beijing rose 7.5% to 38,144 yuan (RM18,012.17) per square metres in the second quarter.

The reluctance so far of developers to discount their projects had kept price levels stable, analysts said, but their resistance to cut prices was beginning to falter.

"Developers began to offer discounts in their new projects in Tongzhou district [in southeast Beijing] last month due to plenty of new supply," Wong said, adding that discounts of up to 20% were now being offered. Wong said developers had also begun to offer discounts of five to ten% and furniture coupons for new releases in other districts.

Property agents said Hopson Development Holdings' No 8 Royal Park residential project in Beijing was offering a discount to buyers making one lump-sum flat payment. With supply increasing, Wong expects the trend to gather pace next month and more new projects to cut their asking prices. "Home-seekers are hesitant to buy properties currently. If the supply continues to increase, developers will be forced to cut the asking prices to lure them into making a decision," he said.

David Ng, head of regional property research at the Royal Bank of Scotland, said mainland property prices had so far remained stable. But prices of high-end residential flats would be down some 5% by the end of this year, while prices of mid-range housing estates would fall 20%. — South China Morning Post
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