Property

Weak sales in Golden September

Weak sales in Golden SeptemberUsually known as “Golden September and Silver October”, September is traditionally regarded as a peak season for China’s real estate sales. However, owing to the rising home prices and a lack of new supply, the property market didn’t fare very well this year. According to media’s reports, many mainland cities recorded weaker-than-expected home sales in September. For example, Shenzhen’s property sales dropped 34% month-onmonth. In Beijing, the sales number fell 25% over the same period.

Spurred by twice interest rate cuts and developers’ price slashing strategy to woo first-home buyers, property market stayed weak over the past few months, reducing the inventory in many cities.

Although most developers try to push out more units on the market during the peak season, their abilities to supply have been undermined greatly by the unexpected upsurge in sales earlier this summer. With most of the lowend units were sold, developers now need to release more medium-and high-end units to the market with higher price tags. On the other hand, more developers have started to mark up their asking prices, as the strong sales in the past few months have eased their liquidity pressures.

As a result, rising home prices and the shortage of low-end new supply have restrained housing demand from occupant homebuyers as they usually have limited budgets and are more sensitive to price fluctuations compared with investors and trade-up buyers. More prospective home buyers are adopting a waitand- see approach.

According to a survey compiled by a leading property website in China, about one-third of respondents would purchase flats in the next two months, whilst over 50% of them would stay on the slideline until home prices go down again.

More importantly, developers have been encountering more difficulties in getting presales approvals since the imposition of a tougher control on the high-end projects pre-sales. Many of the pre-sales applications have been on hold because the Government is concerned about those pricey new flats which could cause a structural increase in the average home prices in the city. In Guangzhou, the Government in late September halted sales of some high-end residential projects, citing that it had implemented new measure to control the pre-sale and transaction pace of abnormally high-priced projects.