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

China Vanke, the nation’s top property developer by market value, has announced that its 2007 net profit more than doubled year-on-year as sales soared.

The Shenzhen-based company said in a statement to the stock exchange that net profit rose 110% to RMB4.8 billion ($681.7 million). Revenues rose 98.3% to RMB35.5 billion as Vanke sold 6.14 million square meters of apartments, up 90% year-on-year. These apartments were worth RMB52.4 billion, or RMB8,532 per square meter, up 30% per square meter from 2006.

Vanke sold 3.23 million square meters in 2006 for RMB21.23 billion.

Vanke’s directorate office explained that figures for apartment sales and revenue differ because some of the sales figures represent progress payments on units under construction and won’t be counted as revenue until construction of the apartments is completed

For some time, the government has been trying to curb rising housing prices, which are adding to the financial pressures on Chinese families. The top economic planner, the National Development and Reform Commission, said that housing prices were rising at a slower pace as macroeconomic tightening policies had begun to pay off in November. Vanke’s figures seem to suggest that there is still some way to go.
Source: China View

Discounts and other incentives are being used to fight shrinking sales of property.

Vanke, the largest developer on the mainland by assets, announced an across-the-board discount of over 5% for 10 of its properties in Shanghai. It is the first time the company offered such a large discount in the city. Vanke is offering even better terms for cash buyers. A sales clerk at one of the company’s offices said those paying the full amount at once will get as much as an 8% discount.

Industry insiders said such a strong promotional offer by a major developer in the city indicates the market will continue to be bleak in the months to come.

Chen Sheng, director of China Real Estate Index System, said many other real estate developers may follow Vanke’s example by offering more discounts.

Shanghai-based Jing Rui Properties has also lowered its prices by offering a 3% discount for group purchases and a 2% discount for those recommended by previous buyers.
Hopson Development, a Hong Kong-listed real estate firm, picked out several apartments for sales promotion in Beijing, cutting down prices from RMB30,000 per sq m to RMB22,500 per sq m.
A project developed by Beijing-based Huayuan Real Estate is offering over 7% discount for those buying small apartments.
Coastal Greenland group, also a Hong Kong developer, reduced its prices for new projects in Beijing, lowering them by around RMB400 per sq m from the average of RMB17,000 per sq m.

Industry analysts said a number of large developers are trying to sell quickly and then take over other projects and smaller developers when the market dives. Some of them, however, are eager to sell off their projects to improve their annual reports.

Zhang Lei, a marketing professional with a developer that has several high-end projects going in Beijing, said, ‘Sales of high-end projects will face a big challenge this year as most buyers are investment-oriented.’
Source: China Daily