The Economic Observer, the Chinese language newspaper in Beijing, reports the government is likely to take measures to ease property developers’ funding difficulties caused by loan curbs and falling sales. The source for this is not identified.

The Chinese-language newspaper said the People’s Bank of China, the Ministry of Housing and Urban-Rural Development and other ministries held consultations on stabilizing the property market.

The newspaper, citing a National Development and Reform Commission report, said a decline in property prices will erode demand and disrupt economic growth.

The NDRC report said, according to the newspaper, that housing sales in China dipped 0.4% from a year earlier to 136.6 million square meters in the first four months.
Source: Shanghai Daily

Credit Suisse said it maintained its ‘overweight’ rating on China’s property sector despite June new home sales showing weakness in several key provincial cities. It believes a recovery is possible by the fourth quarter.

Credit Suisse analyst Ronney Cheung said low sales figures do not bode well for China’s listed developers who are now struggling to meet their year-end goals.

Transaction volumes from all cities were down 23-56% month-on-month with the exception of Beijing and Tianjin, up 15% and 13% respectively. Shenzhen was the hardest hit, with transactions tumbling 38% month-on-month.

Sales are expected to remain stagnant up to September on fears of potential rate hikes by the central bank in a bid to fend off growing inflation and still-lower transaction volumes during the Olympic Games.

However, there should be a turnaround.

Ronney Cheung said, ‘A recovery in transaction volumes should be expected from September onwards, due to the removal of several concerns and pent-up demand. We estimate developers may further cut prices in order to meet their funding needs and to achieve their sales targets.’
Source: Quamnet

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

Details on investment activity and transactions for the first half of 2008 throughout Asia have been released by CB Richard Ellis.

Demand has slowed from last year, but is still strong with core investors.

Highly leveraged investors have largely stepped out of the region’s investment markets due to the continued credit squeeze. Fnancially-sound investors remained generally positive on the outlook.

Overseas investors remained keen on acquiring investment properties in China, in spite of the increasing restrictions imposed on the entry of foreign capital.

Properties with offshore equity structures therefore have a significant advantage in the market as they enable investors to avoid time-consuming onshore approval procedures.

Larger developers are seeking to acquire smaller developers with attractively valued development land reserves.
Source: I-Newswire

Goldman Sachs, a leading global investment banking, securities and investment management firm, said in a recent research report that it retained its prudent attitude towards the real estate market in mainland China.

Perhaps we should get a definition of the word prudent: sagacious in adapting means to ends; circumspect in action, or in determining any line of conduct; practically wise; judicious; careful; discreet; sensible.

If that is what Goldman Sachs is suggesting it seems judicious, careful, discreet and sensible.

The report suggests that housing sales around the Yangtze River Delta region have another drop coming in the near future.

For the listed real estate developers used in this research, average housing sales for the first half of 2008 accounted for only 30% of the sales goal for the full year. Which means to make-up, sales have to be 70% in the second half which presents real estate developers with a tough challenge.
Source: Trading Markets