New homes transaction in Shanghai may fall by 70% in May

SHANGHAI: With some real estate developers unwilling to slash prices amid an uncertain local market, new homes transaction in Shanghai may fall 70% in May from a month earlier, reported Shanghai Daily.

According to Shanghai Uwin Real Estate Information Services Co, there were just 258,000 sq m of new homes sold in the first 27 days of May (excluding homes designated for relocated residents under urban redevelopment plans), compared with the expected 300,000 sq m. The figure is a steep decline from the 1.02 million sq m sold across the city a month earlier.

Supply of new homes has also declined with 850,000 sq m launched for sale in May, compared with 1.23 million sq m in April.

Analysts said only a few developers have slashed their prices and these are mainly in the city’s outlying areas, citing as an example a residential project in Gucun, Baoshan District, which discounted its prices by as much as 25% from six months ago, Shanghai Daily reported.

According to an analyst at China Real Estate Information Corp, real estate developers are waiting for detailed local guidelines as they find it hard to determine if they should cut prices and by how much.

The Beijing News reported on May 28 that China Vanke Co, China’s largest publicly listed developer, may slash apartment prices by 10% to 30% within three months.

Colliers International’s latest Shanghai Research Bulletin reported that in April, the price index of 70 middle-sized to large cities surged by 12.8% year-on-year (y-o-y), the highest growth since records began in 2005, despite a new round of tightening policies introduced by the central government in mid-April. However, transaction volumes fell sharply, which will eventually mount pressure on developer’s cash flow, and then add pressure on the prices, said Colliers.

The central government, in a move to curb soaring house prices, introduced several measures in mid-April, including higher down payments and mortgage interest rates for buyers of second homes.
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