BEIJING: Mainland home prices have tumbled by as much as 19% this month as developers resort to wide-scale price discounting in a bid to lure wary buyers back to the stagnating property market.
Guangzhou-based Evergrande Real Estate Group fired the first salvo in the latest discount war on May 5 when it said it was slashing prices in 40 projects in 20 cities by 15% until Sunday. Other developers followed suit and prices of units in projects being launched in Shanghai, Beijing and Nanjing have been cut by as much as 19%.
The discounts are in response to a sharp fall in sales since the April 16 crackdown on credit to the housing market, with measures that included higher initial down payments and tighter loan conditions for buyers of second homes. "Buyers are still waiting on the sidelines as they expect prices will have to fall further," said Anson Li, the general manager at the Shanghai branch of Hong Kong-listed property agency, Midland Realty.
He said most of the developments being offered at lower prices were located on the outskirts of Shanghai, where home values had surged by as much as 33% since January. Prices in the city centre, by contrast, had so far remained firm.
"The majority of apartments and villas in the outer areas were bought by speculators as prices had lagged those in the urban area," Li said.
In response to the downturn in business, Midland was now considering a cut in staff levels of 30% over the next two months.
In Shanghai, about 40 projects on the city's outskirts have been released at price cuts of about 12%, according to news website Hexun. Domestic developer Greenland has offered a 12% discount at its five projects. Units at the Garden Mansion in Baoshan, about an hour's ride by bus to the city centre, are now selling at 14,000 yuan (RM6,608) per square metre, down from 16,000 yuan per square metre.
But buyers remained reluctant to return to the market, said Li, who believed that home prices in the outlying areas would have to drop by 30% to 50% before they came back.
"This is just the beginning of the price adjustment and the rural area will be hit hardest," he said.
Another agent said some builders were offering interest-free top-up loans of up to 20% of purchase prices to non-first time buyers who were now required to make an initial 50% down payment on their purchases, up from 40% previously. The special offer would allow these buyers to make down payments of just 30% of the home value in order to reduce their financial burden, an agent said.
The loans would have to be repaid in one year after the purchase.
In the secondary residential market, a luxury apartment at Shimao Riviera Garden in Pudong -- a favourite target of investors -- sold for 11.5 million yuan last week after the owner reduced his asking price by 1.5 million yuan, or 12%.
The price cut came after property transactions plunged 70% across the country as buying interest evaporated after the introduction of measures to curb demand and price growth.
In addition to raising the initial down payment required on the purchase of second homes from 40% to 50%, the government said loans to buyers in this market segment would have to be charged at 1.1 times the People's Bank of China's benchmark interest rate of 5.31% from April 14.
Three days later mortgages on purchases of a third property were banned entirely, and residency requirements were imposed on buyers.
In Beijing, the Overseas Chinese Town residential project, located at East 4th Ring Road near Happy Valley, relaunched two weeks ago at prices of 25,000 yuan per square metre versus the originally advertised price of 28,000 yuan per square metre -- or a discount of more than 10%.
Prices of units in another project, Lan Villa built by developer Raycom, were discounted by 18.9% to 15,000 yuan per square metre, from 18,500 yuan per square metre. The development is in the Yizhuang area in Tongzhou district in suburban Beijing.
However, the discounts had not triggered any jump in sales, agents said. "You won't find any leaflets in the sales office about the price cut. Developers are trying to keep it low profile to avoid protests from buyers who bought their units earlier," an agent said.
In Nanjing, selective new projects in rural areas were being offered at prices of around 9,000 yuan per square metre to 15,000 yuan per square metre - or discounts of some 9%, agents said. – South China Morning Post
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