CHINA isn’t so hot for houses anymore.

    Housing sales in the first quarter fell 7.7 percent to 1.11 trillion yuan (US$178 billion) compared with a year earlier, as lending limits and falling prices in some Chinese cities weakened housing demand. Growth in property investment and land sales have slowed, while construction starts have also declined by 25 percent in the first three months this year.

    Some property developers have been cutting prices, and others have become more conservative about buying land in smaller Chinese cities amid concerns about a supply glut of apartments and difficulties in offloading inventory.

    These firms are likely to face tighter cash flow as they work to complete projects started in 2013 while grappling with slowing sales growth and banks are taking longer to approve mortgage applications, say analysts. A recent loan default by property developer Zhejiang Xingrun Real Estate Co. in Fenghua City has also caused jitters throughout the housing sector.

    “Banks have become more selective following recent defaults in China, and we expect liquidity of developers with relatively weak credit quality to decline as a result,” said Gerwin Ho, a senior analyst at ratings firm Moody’s Investors Service.

    More homebuyers in smaller cities are becoming wary about purchasing homes that have yet to be built or are currently under construction, because of concerns that cash-strapped developers may abandon projects halfway if they run out of cash.

    “There is no way I will buy a home that is currently under construction,” unless it is built by a firm with a national reputation, said Yuna Zhang, a 26-year-old factory office worker in Yingkou, a third-tier city in northeastern China’s Liaoning Province. Home prices have stagnated there.

    The slowdown could be another brake for growth, following China’s first-quarter report of a 7.4 percent rise in GDP, the slowest rise in 18 months.(SD-Agencies)