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QINGDAO TODAY
在线翻译:
szdaily -> Business -> 
Property market comes under downward pressure
    2018-10-16  08:53    Shenzhen Daily

PROPERTY developers in China usually look forward to the months dubbed “Golden September and Silver October” as the high season for new home sales. This year is proving to be different.

Instead, they are feeling a chill and one major realtor has warned that “winter” is coming as developers struggle to maintain sales momentum despite gimmicky promotions and discounts.

After almost two years of local and Central Government measures to calm the red-hot market, more signs are emerging that the property sector is finally slowing down.

They come as the Chinese economy faces broader headwinds, including from a trade war with the United States and the effects of a campaign by the Central Government to clampdown on easy credit — a campaign that has weighed on both property buyers and developers.

Home prices rose in August at their fastest pace in nearly two years, but more forward-looking indicators are less robust. Property investment growth has been weakening and developers have left a trail of failed land auctions — almost unheard of last year.

Now data from property researcher CRIC suggests buyers are holding back too.

Its figures show sales by floor area, often used as a leading indicator of demand, dropped 27 percent in China’s Golden Week holiday earlier in October.

September’s figures looked stronger, rising by 10 percent. But that was helped by more apartments for sale in top cities and compared with a weak year-earlier month. Measured against September two years ago, September 2018 sales were down 29 percent.

The weakness reflects a slowdown in China’s smaller cities, payback for rapid price growth earlier this year, while top-tier cities recorded solid sales. CRIC’s data tracks 31 cities.

“There’s downward pressure on home prices especially in third and fourth-tier cities,” said Nomura chief China economist Ting Lu. “They have been previously rising on stimulus policies for two to three years and now they have reached a peak.”

Many developers offered promotions to lure buyers, including free cars and down payments of as little as 10 percent of the purchase price. Other developers slashed prices as much as 30 percent.

“Looking forward, as developers are facing quite big capital pressure and a hot property market in the past two years have overdrawn part of the future demand, so the market is facing relatively large pressure,” said CRIC analyst Xin Shen.

Sentiment started to turn more cautious at the start of the second half of 2018 following a surge in failed land auctions. Buyer queues have grown shorter, in contrast to last year when developers were often overwhelmed with demand from would-be homeowners.

“When the market capacity reaches a certain high level it will go downward because people’s purchasing power, financing capability and repayment ability are limited,” said Nomura’s Lu, who expects a downtrend in both home sales and prices.

In Shanghai and in Jiangxi Province, price cuts of up to 30 percent by Country Garden Holding, China’s biggest property developer by sales, drew protests from existing homeowners who had not received such an offer.

Country Garden said promotions during the traditional high season were normal practice and the discounts only targeted returning customers.

China Vanke also faced protesters in the eastern city of Xiamen after it offered new buyers discounts of around 30 percent.

In a meeting last month, China Vanke chairman Yu Liang told staff that “survival” was the ultimate goal for its next three-year strategic plan, as “the turning point has really arrived” for the industry, according to the minutes of the gathering.(SD-Agencies)

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