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BEIJING: Non-stop policy measures aimed at curbing demand and price growth in the mainland property market have finally forced developers to cut asking prices at new residential projects — a clear signal that market-wide price corrections are now under way, analysts say.
"China Vanke, the largest developer on the mainland, started to cut its asking prices at new projects two weeks ago and other privately owned developers have followed," said Alan Chiang Sheung-lai, the head of residential property at consultant DTZ in China.
Kenneth Pak Kei-yuen, a general manager at Midland Realty on the mainland, said price cuts in new suburban projects were becoming common in Beijing.
Among the sharpest of the price-cutting measures so far has been at the second phase development of Sino Ocean Land's Poetry of River residential project in Beijing. The developer is offering a 17% discount for buyers paying in cash, while buyers with mortgage plans will get a 16% discount.
Under the discount scheme, the average asking price of the project was cut to 21,000 yuan (RM9,758.87) per square metre this month, 16% below the prices at which flats were sold in the first phase of the project last year.
Pak said other developers were offering discounts of 2% to 4%.
On Monday, China Evergrande Real Estate chief executive Xia Haijun said discounts of between 5% and 20% would be offered on some projects.
Beijing Roaming Wonderland, a project developed by China Vanke and Beijing Urban Construction Group, is offering a 4% discount to full-payment buyers and a 2% discount for buyers with mortgage plans.
Dickson Wong Hung, the chief executive of Centaline Property's China office, said developers had begun to lower their asking prices because banks had tightened conditions on property loans and restrictions were imposed on purchasing second homes. "Previously, about 30% to 40% of buyers in Beijing were foreigners or mainlanders from other provinces. However, we lost these buyers after the government imposed restrictions on buying homes," he said.
According to the firm, the absence of these buyers contributed to a 60% fall in sales on the secondary market in the first half of this month, compared with the same period in January.
"We saw some developers begin to face capital pressure after the banks tightened property-loan conditions early this year. We now expect to see more developers cut their asking prices on new projects in the second quarter."
Wong said property prices in Beijing were now likely to fall by 10% to 15% by the end of this year from their price levels in January, and a similar correction was likely in other first-tier cities.
Alan Chiang of DTZ believed pressure on developers to continue cutting their prices would likely increase in the middle of this year, traditionally a peak season for new releases.
"Currently, most of the new housing supply is large residential flats. But we will see plenty of small and mid-sized flats released on the market in June and July. That will lead to a sharper fall in property prices." — SCMP
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