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Construction: Developers face low season

By Hu Yuanyuan (China Daily)
Updated: 2008-09-02 09:55

Chinese property developers, hard-pressed by falling sales and tightening credit, have never waited for "Golden September and Silver October", the traditional hot season for the property market, this anxiously.

But they are likely to be disappointed this year as there is no sign of any recovery in the sector because of a glut and stricter credit controls, experts say.

The soaring supply in September, including a large number of low-cost units, will be partly responsible for blocking the chances of any market rebound in Beijing.

There will be nine low-cost housing projects and 27,000 apartments entering the capital's property market before the end of October, with the average price being 4,000 yuan per sq m lower than the commercial ones.

A real estate exhibition in Beijing. [China Daily]

"The sudden supply of so many low-cost units will definitely weigh on the sales of new commercial buildings," said Hu Jinghui, deputy general manager of www.5i5j.com, a website specializing in the pre-owned home market.

According to Yahao Real Estate, a Beijing-based property brokerage firm, around 80 commercial residential projects will be put up for sale in September and October.

Li Wenjie, general manager of Centaline China (North China region), said Beijing's property market may drop another 10 percent before the end of this year.

The situation in Shanghai isn't much better either. Property prices have held steady there in the past months but are now showing signs of a meltdown.

Vanke, the country's largest developer, launched a promotional campaign from August 30, with eight projects in Shanghai offering an average discount of 95 percent.

"But Shanghai's property prices are not likely to drop drastically because of the huge potential buying power," said Fu Qi, an analyst with E-house Real Estate Research Institute. "In the following months, the transaction volume may gradually pick up, with the price fluctuating narrowly."

The government shows no signs of easing on the credit policy for real estate firms. At the end of August, the central bank, together with the China Banking Regulatory Commission, issued a notice requiring financial institutions to have stricter control over their loans to property developers and forbidding loans to meet land remise fees.

The dismal real estate outlook, on the other hand, may speed up a realignment in the industry. At a time when many property developers are struggling with a tighter cash flow, some that have followed a solid development strategy all along will easily tide over the low season.

"Because of our rich product line, we are not seriously hit by the market adjustment," said Gu Wei, spokesman for Longhu Real Estate Development Co Ltd, adding the company's sales exceeded 1,000 apartments every month from April to July.

Other cash-rich companies have also intensified efforts to take over smaller rivals. SOHO China, for example, said on Sunday it would pay Zhong Ye Xin Ao Zheng Cheng Real Estate Development Co Ltd 890 million yuan ($130.35 million) for land-use rights at the Zhongguancun SOHO project, an office and retail complex in Beijing.