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Buyers losing interest as prices stay high

By Zhou Yan and Jin Jing (China Daily)
Updated: 2008-04-03 09:53

Shanghai's real estate agents are keeping prices high despite talk of a property slowdown that's stifling homebuyer enthusiasm.

The central bank's first-quarter survey of residents in 50 Chinese cities shows that only 14.6 percent plan to buy homes in the next quarter, down 1.3 percent from last quarter and a 1.9 percent drop year-on-year.

Of the seven big cities surveyed, Shanghai saw the most distinct percentage fall in homebuyers for the next quarter, down to a record-low 4.3 percent.

But from a seller's perspective, there are signs the market could be about to warm up again.

According to the China Real Estate Index System, 5,260 commercial apartments were sold in Shanghai from Mar 17 to 23, up 14.37 percent on the previous week, and the sixth consecutive weekly rise.

"Property prices in Shanghai have shown signs of recovery this month, as huge demand still exists in the city," Zhang Qi, an analyst at the China Real Estate Index System, said.

There were also positive signs for the market at the four-day Shanghai Spring Real Estate Expo, an indicator of property prices for the whole year. The expo was held last month at the Shanghai Exhibition Center.

Despite sales shrinking 33 percent at the expo from 2007, real estate developers showed no intention of cutting prices, expo organizer Vnuexhibitions said.

"The average price of Cedar Island rose nearly 20 percent from 2007 to around 10,500 yuan ($1,497.86) per sq m," Jin Ping, a sales representative at the expo, said.

Cedar Island, a series of luxury apartments located 3.5 km away from Shanghai's outer circle Xinzhuang, went on sale on Mar 20. "We don't plan to offer any discounts," Jin said.

Discounts and other promotional offers are rare at the expo, but this year some small price cuts were offered.

Ludao Yangguang Yuan, a villa group located on Chongming Island, on Shanghai's outskirts, was offered for a 5 percent discount when buyers paid the amount in full. "We're trying to find more buyers with this promotion, but it hasn't had much of an effect on sales," Liang Yan, a sales representative, said.

"The average price was 11,000 yuan per sq m, an increase of roughly 38 percent from 2007," Liang said.

"The residential market has stayed subdued, with buyers putting off buying properties until the cold snap passes and they have a clearer picture of where the market is going in 2008," James Macdonald, senior manager of Savills China Research, said.

Shanghai property prices were stable in February from January and up 9.8 percent from 2007, the National Development and Reform Commission said.

But homeowners trying to offload property on the pre-owned market are mixed about its direction this year.

Around 38.46 percent of homeowners surveyed by Midland Realty (Shanghai) recently said prices would remain stable, while 27.62 percent expect them to rise and 25.17 percent think they will fall.

If discounts are offered in the pre-owned market, they are likely to be small. Only 5.6 percent of homeowners said they would lower prices by over 5 percent, while 76.68 percent of sellers said they would reduce prices by only 3 percent or less.

But with the rentals market picking up, many homeowners are choosing to rent out their apartments rather than sell them. Around 62.59 percent of homeowners said they would consider renting their apartments if they don't sell in a certain period.

"Renting their apartments out will also give homeowners more time to find satisfactory buyers and allow them to wait for a higher price," Feng Hongrui, general manager of Midland Realty, said.