CHINA TOPIX

11/22/2024 08:01:19 pm

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China Real Estate Development Enters Cool Down Phase

China's real estate sector is showing signs of a major slowdown as several completed and on-going projects are slashing down prices.

Traditionally strong property markets in Shenzhen, Hangzhou and in the nation's capital are offering discounted rates. In Beijing's suburban areas, apartments are being offered at less than 12 percent or US$ 483.00 (3,000.00 yuan) for every square meter. Maximum price per square meter is at US$3,380.00 (21,000.00 yuan).

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In the Xiaoshan district of the city of Hangzhou, apartment sale prices range from US$ 402.44 (2,500.00 yuan) to US$ 2,012.18 (12,500.00 yuan), down by nearly 17 percent.

The cooling phase is being supported by latest data from the National Bureau of Statistics (NBS).  In February, prices for housing property increased at a much slower pace compared to January while most cities did not achieve a rise on sales based on a month-to-month data.

Property developers are reportedly not admitting to the stiff competition each developer faces including the scarcity of buyers. Instead of an actual price slash, developers offer free items usually not included in the past. To generate sales, developers may do away with downpayments, offer furnishing and interior upgrades to prospective buyers.

Gu Yunchang, an official for the Ministry of Housing and Urban-Rural Development downplayed the slow-down phase and dismissed any further speculations. The over-all prices are not expected to go down despite the fact real estate developers may slash prices for a quick sale and remain liquid.

The China Real Estate Industry association sees the current situation as a corrective phase in the real estate industry after a rapid and consistent rise in the last few years, a rationalization of price changes as a result of market demand..

Based on a monitoring of industry indices, prices in the housing sector have been on a constant rise since 2003. Price per square meter experienced an annual 10.3 percent increase starting at US$ 353.66 (2,197.00 yuan) to US$ 941.70 (5,850.00 yuan) for every square meter.

Forecasters believe that private investment in the industry will also slow down this year. Indices report that investments grew by 11.41% in 2012 and increased to 19.8% in 2013.

This slowdown will affect financing for fixed assets and weaken the forces that drive China's rapid economic expansion.

Analysts believe that stimulating the market by relaxing credit limits and taxes will not be helpful in the long-run; instead it will result in a serious oversupply.

Since China implemented an encompassing house reform toward a market-oriented policy in 1998, the real estate industry's investment and housing supply sectors experienced phenomenal growth at 19 percent every year. 

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