Wednesday, February 27, 2008

Chinese Property Prices on the Decline

by Richard York

The biggest property developers of China are now seeking the help of discounts and incentives for customers so that the declining sales and credit crisis can be kept in control. The problems of declining sales and the credit shortage have begun since the end of 2007. The biggest developer by assets on the mainland, Vanke Co Ltd has declared across the board a discount of about five percent on ten of its properties located in Shanghai. The announcement by the company came on the Lantern Festival that is on February 21, which according to the Chinese tradition is at the end of the celebrations for the lunar New Year. The announcement of the big discount by the company in the city was the first of its kind and this amply shows that property prices are on the decline in China.

There are even more attractive terms which the company is offering customers who are ready to pay in cash. One of the sales clerks in the office of the company said that if customers pay the full amount in one installment they will be offered a discount of about 8%. Customers who are ready to pay half the amount in the form of a down payment qualify for a discount of about 6%, the clerk further said. The two projects of Vanke in Beijing were ready to offer 5% to 7% discounts on a one time full payment of the property to the buyers. This discount by the company was offered at the Spring Festival in China. The never-before discounts of the company offered for the buyers during the festival time worked well for the company. The biggest developer by assets Vanke was able to earn 257 million Yuan on the lunar New Year’s Day. The company said that there was a 70% drop in sales in December 2007 but in January this year it managed to rake in 1.85 billion Yuan.

However, speculators in the property industry say that given the discounts the city’s biggest company is offering its buyers the sign that the property market in the future will remain sluggish. Experts also say that in the wake of the success that Vanke gained through its discount offer can tempt other developers to follow their example which will further worsen the property market.

Director of China Real Estate Index System Chen Sheng expressed that there will be many more developers who will resort to the ways which Vanke has initiated and offer their own discounts on the property and one such example can be found in Jing Rui Properties Co Ltd based in Shanghai. This developer has offered a 3% discount for buyers who will be buying properties in groups, the company also tried to attract buyers by offering a 2% discount for the buyers who will be recommended by the earlier buyers of the company’s properties. Another Hong Kong listed real estate firm, Hopson Development, came out with many of its apartments on discount sales for luring the buyers. The firm lowered its property prices to 22,500 Yuan per sq m from its earlier rate of 30,000 Yuan per sq m.

 

 

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