Tuesday, 17 February 2009
Price War Developing Between Beijing Housing Builders
“Experts predict the real estate market will rebound by the end of 2009. If it does not, the situation will be worse than it is now, so developers are choosing to sell as many apartments as possible in the first half of the year,” explained a sales supervisor of a well-known property company.
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Price War Developing Between Beijing Housing Builders
CSC staff, Shanghai
16 February 2009
Huge inventory and depreciation pressures are triggering a new round of fierce competition in Beijing’s housing market. After Vanke, China’s largest residential real estate developer, further cut prices at the beginning of the year, other first-class developers, among them Zhujiang, Poly, and Coastal, have had no choice but to follow suit, and the capital is now witnessing a housing price war that must have buyers in a state of delight.
“The pressure is huge, and we’re going to sell all our apartments within three months. If everything goes smoothly, the company will get back 1.9 billion yuan,” a Poly insider revealed to China Business News.
Poly has formulated a “tough” sales plan for Jinquan International, its real estate project near Asia Games Village. Prices for the project were once as high as 25,000 yuan per square meter. It was rumoured earlier that the average price for newly finished apartments would be cut to 20,000 yuan, but in fact, per square meter prices have plummeted to 15,500 yuan.
To recoup funds as quickly as possible, Poly has hired two intermediaries to sell another of the company’s real estate projects at the same time.
Zhujiang has cut its prices to around 17,000 yuan per square, about 6,000 yuan lower than the peak price. Another of the company’s projects opened yesterday at 10,800 yuan per square meter, surprising low.
“As the apartments are well-decorated, if we cut the decoration expense by 2,000 yuan per square meter, the real price is only 8,800 yuan, 3,000 to 5,000 yuan lower than prices of neighbouring buildings,” said an industrial insider. Liu Zhilong, sales supervisor of this project, said the company aimed to unload all the apartments within the year.
More Selling Off
Poly and Zhujiang are just two of the developers who are so eager to sell. With real estate depreciating, prices are falling to help developers get their hands on some badly needed cash.
One real estate project near Olympic Forest Park is offering a 20% discount, cutting as much as a million yuan off the asking price. A real estate project in Huilongguan has cut the price for some apartments to 6,500 yuan per square meter (less than US$1,000, about $90 per square foot).
After the Chinese New Year, prices for many new apartments in Beijing have commonly declined by as much as 35%.
Even with high unsold inventories, developers have continued to build. Zhujiang will be promoting four new projects in Beijing in the first half of this year, and will start selling two new projects in Tianjin. “The supply will be much higher than 2008,” declared Liu Zhilong. Shimao will have over 30 projects on the market this year, aiming to realize 15 billion yuan in sales, while R&F is looking at 38 new projects.
“Experts predict the real estate market will rebound by the end of 2009. If it does not, the situation will be worse than it is now, so developers are choosing to sell as many apartments as possible in the first half of the year,” explained a sales supervisor of a well-known property company.
According to the latest government figures, by the end of 2008, vacant apartments nationwide totalled 136 million square meters. In Beijing alone vacancies reached 14.383 million square meters, an increase of 26.6%, 3.021 million square meters, over the end of 2007. Buildings vacant for under 12 months account for 64% of the total, 7 percentage points higher than the end of 2007. All of which amounts to heavy pressure on developers in 2009.
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