Thursday, 12 February 2009

Shenzhen ushers in sector rebound

Sales volume shows third consecutive month of modest growth after 14-month slump

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Shenzhen ushers in sector rebound

Sales volume shows third consecutive month of modest growth after 14-month slump

Yvonne Liu
11 February 2009

Shenzhen may become the first mainland city to recover from the nationwide downturn in property prices, with sales volume now into its third consecutive month of a modest rebound.

Until the latest signs of a recovery in demand, the city had led the market downwards with sharp falls in sales since the third quarter of 2007, after the government released a series of austerity measures aimed at containing the sharp rise in property prices at the time.

Research by property consultant DTZ shows that transactions in Shenzhen’s primary market had fallen to about 300,000 square metres a month over the period from August 2007 to October last year, from previous average monthly levels of roughly 500,000 square metres.

But in recent months, the number of deals has increased steadily above the average level during the 14-month decline, despite overall sentiment on the market remaining poor because of the global financial crisis.

The DTZ research shows sales volume in Shenzhen’s primary market rose 74 per cent to 590,000 square metres in November last year from 340,000 square metres in October and a further 24 per cent to 730,000 square metres in December.

Although sales then showed a 46.58 per cent month-on-month decline last month to 390,000 square metres, the volume was higher than the October low point for sales and well above the average sales volume during the market slump.

Alan Chiang Sheung-lai, the head of residential property at DTZ’s mainland division, said transactions fell last month because of the long Lunar New Year holiday break.

“In December, we noticed that transactions in Shenzhen’s property market had rebounded gradually in the last two months of 2008,” said Mr. Chiang.

“But at that stage, we couldn’t confirm that the consolidation in the market had come to an end.”

He said he now believed the increase in transaction volume suggested property prices in Shenzhen had fallen to levels where buyers were willing to return to the market. He expected sales volume to exceed 500,000 square metres this month.

“If the transactions volume rebounds to 500,000 square metres or more for three to four months, that would suggest Shenzhen’s property market is back to normal,” he said.

Mr. Chiang said buyers were returning to the Shenzhen market following the slide in prices last year.

“Shenzhen recorded the sharpest drop in prices among the mainland cities and was also the first city in which prices dropped to reasonable levels,” he said. He expected property prices in Shenzhen to stay at these levels for some time, despite the consolidation in the market having come to an end.

“The new housing stock in Shenzhen has reached a high of 3 million square metres. Property prices will not rebound until the abundant stock has been absorbed,” he said.

He estimated it would take about four months to absorb the supply.

“Demand for residential units in the city remains strong, as the financial crisis has had a limited impact on the city’s [technology] and other businesses,” he said.

Property prices in Shenzhen had fallen 25 per cent off their peak in July 2007 before beginning to stabilise over the past few months, said Samuel Wong, the general manager of Midland Realty China’s Shenzhen branch.

Centaline (China)’s agency business in Shenzhen has improved in the last few months. The firm sold 200 units during the Lunar New Year.

Andy Lee, the general manager of the Shenzhen office, said the firm sold 150 new units over the past weekend. The transaction volume was 20 per cent higher than before the festival.

He expected property prices to increase 5 to 10 per cent this year.

Many Hong Kong people bought properties in Shenzhen a few years ago, before Beijing restricted foreigners, including Hong Kongers, from buying second homes on the mainland, starting in 2007.

Mr. Lee said the number of Hong Kong buyers had not rebounded, as the government had not relaxed the ban.

China Overseas Land & Investment vice-chairman Kong Qingping said property prices in southern China had fallen to 2006 levels and had reached their trough.