Shanghai’s new house sales in July dropped 30% over the previous month and average selling prices of first-hand houses slid to RMB12,824 per square meter from RMB16,988 in June.

Commodity property supplies in Shanghai were 1.74 million square meters in the month, slightly less than the 1.81 million square meters in June.

Commodity house supplies rose slightly from 1.29 million square meters in June to 1.29 million square meters.

Analysts said the major reason for the increase in supplies is that some large real estate developers sold new houses at discount prices and cut the prices of already-built houses. But the price reduction strengthened the negative outlook for the domestic real estate market and propelled more potential house buyers to hold money tightly, expecting for lower prices.

Analysts had little comfort to offer. They says as some demands for houses have been met in recent months and larger real estate developers’ price reduction attracted many house buyers from small ones, Shanghai’s real estate market would become even gloomier in August and  more real estate developers would have to cut prices.

This situation may turn better in September and October, when the price-performance ratio of some houses would be seen and another round of purchasing power would be accumulated. House sales then will pick up to a certain extent.
Source: Trading Markets

The continuous shrinking property transaction and dropping prices prompt more people to hesitate and even withdraw their decision to buy properties.

Industry statistics show that the ratio of sold floor area to finished floor area in Beijing, Shenzhen, Guangzhou and Nanjing has below 0.7, putting more pressure on the property price.

Some customers’ eager to get refunds, however, are mostly in the mid-end apartments range which are in poor locations. For high-end apartments or villas, the price remained comparatively firm.

In early June, Beijing municipal commission of urban planning launched a new standard for construction, limiting the average floor area of each apartment to no more than 100 square meters.

Jason Leow, deputy CEO of CapitaLand, China’s property market is now seeing a big shift from investment-orientated buying to self-use buying. This requires real estate firms to pay much more attention to their product’s quality and services.

Jason Leow said, ‘In such a market with a wait-and-see atmosphere, we would be more critical about the location and quality of our products,’

CapitaLand planned to launch three residential projects in Beijing this year, all in the capital’s very urban areas.
Source: English People’s Daily Online

The average transaction price of new residences city-wide fell 8.2% to RMB13,893 ($1,985) per square meter in Shanghai in the first four weeks of this month. At the same time fewer apartments within the Inner Ring Road were sold.

According to statistics released yesterday by Shanghai Youwin Real Estate Information Service for the four weeks following May 1, the supply of new residential properties, excluding those designated for relocation uses, reached approximately 1.049 million square meters in the city while a total of 929,300 square meters were sold.

Xue Jianxiong, head of research at Youwin said, ‘The drop in the average transaction price of new homes over the past four weeks was mainly because fewer prime-located apartments, or up-scale properties, were sold during the period.’

In the first 28 days of May, some 66,900 square meters of new homes located within the Inner Ring Road secured buyers with an average transaction price of RMB32,150 per square meter, compared to about 106,000 square meters of new homes sold at an average RMB33,629 per square meter in April.

In June, three high-end projects within the Inner Ring Road, two in Huangpu District and one in Luwan District will be introduced to the market and several small and medium-sized apartment projects — with areas ranging from 50 to 90 square meters per unit and located in the districts of Changning, Putuo, Baoshan, Songjiang and Jiading — are due to be launched in the coming month.
Industry experts predicted Shanghai’s new housing market might see a mild performance in June with total transaction volume similar to May’s, and a recovery not expected till September.
Source: Shanghai Daily

BusinessWeek makes the suggestion that property investment is no longer the sure and certain road to riches in China.

Even after the private housing revolution of the mid-1990s, when many individuals bought flats at knock-down prices from their work units, property owners had no legal means of protecting their homes.

Last year’s property rights law supposedly changed all that and, according to the Chinese Academy of Social Sciences, a remarkable 80% of urban Chinese households now own their homes.

Property prices have risen rapidly. According to the latest figures, prices in the 70 major cities measured by the government’s property index are growing annually at around 11% although prices at the top end are rising much faster than that.

Two years ago, an apartment in Beijing’s Central Park, one of the capital’s smartest addresses, could be had for around US$2,000 per square meter. Now you would be lucky to get it for US$5,000, while the penthouse apartments cost over US$9,000.

High-end property developers, speculators and the banks that finance the deals have made a fortune, but there are signs that the easy money could be coming to an end.

Stricter controls on property speculation and land-hoarding and the government’s credit squeeze is already hitting developers.

In Beijing, strict loan quotas have succeeded in cutting off credit to all but a handful of the biggest and best-connected developers, which can now only secure loans priced at 10% above the nominal interest rate.

Bigger developers have also been hit by the global credit crunch, cancelling bond issuances as demand from foreign investors has dried up.

Shares in developers like Country Garden and Greentown are nearly 50% off their autumn peaks.

Rising inflation, higher interest rates and tumbling stocks are likely to make banks more cautious about their exposure to the property sector, which accounts for one-third of their loan books.

The banking regulator recently warned banks to step up controls on lending to developers amid fears that unsustainable property prices may trigger a rebound in bad loans. According to the Shanghai regulator, US$280 million in property loans went sour last year, twice the number in 2006.

China Construction Bank, the country’s biggest mortgage lender, reckons that a 10% drop in the market should cause no major problems, but a 20-30% drop would be very tough for the country’s still fragile banking sector to handle. And, there are some suggestions that it may come to that.
Source: BusinessWeek

This is called on other, lesser, sites as stating the bleeding obvious. China’s top economic planner has released a report emphasizing the upward pressure for the country’s housing prices.

Quite so. Never have thought of it if it had not been spelled out.

Analysts (remember they were the ones who did NOT forecast the sub-prime slump in the United States) said this might spell further macro-control to prevent the sector overheating.

Despite a minor slow-down in price increases over the first quarter, a National Development and Reform Commission (NDRC) said prices were likely to rebound after a period of adjustment in some cities while overall housing prices nationwide would continue to increase on a modest scale.

There are few who would argue with that.

At the high-profile Boao Forum for Asia earlier this month in Hainan Province, economists and executives recognized 2008 as ‘nothing but a quiet year’ which is probably a polite way of saying we are not certain what will happen.

Hong Yuan Securities real estate analyst Yang Guohua agreed with the official assessment, calling the report ‘fairly objective and credible’.

Despite the snow disruption earlier this year and the declining trade surplus, the Chinese economy still grew 10.6% in the first quarter, a slight decline from 11.7% in the same period last year.
Source: China View