Wednesday, July 14, 2010

Buyer’s hunt for real estate discounts

For the first time in a year, Liu Long, 26, thinks he may consider purchasing an apartment in Beijing, despite the fact that the average price is still rising.

Liu seemed a little tired when he stepped into Kylin Zone, a property project near Beijing’s North Fourth Ring Road.

“This is the fifth real estate project I’ve seen this week,” Liu said.

“To be honest, in the past year, every time I read residential news, I frowned, because I hate to see the price continually rising.”

But he thinks the capital’s tightened property policies may offer a glimmer of hope for him, because property prices have stopped soaring since April and there are signs that prices might be starting to drop.

The Xi’an-born man graduated from Beijing Forestry University in 2008. His desire to own a property in Beijing is pressing because he would like to buy a house for his future wife before getting married.

From local media reports, Liu knew that around 75 property projects in Beijing had begun offering discounts recently; a rarity during the past 12 months.

At Kylin Zone, the project Liu was looking at was offering six discounted apartments as of the Dragon Boat Festival.

The previous average price of a property at Kylin Zone was 30,000 yuan per sq m, but the discounted properties were as low as 26,000 yuan per sq m.

Other projects such as the newly launched Seven Carat near Majiabao subway station and the popular Xifuhui International Community have all offered discounted apartments. The discounts vary from 1 to 10 percent.

Some developers are even waiving property management fees and providing refrigerators, air conditioners or furniture as extra gifts.

“Because the transaction volume in Beijing’s housing market has dropped to a record low for the past two years, the situation has prompted developers to take action to attract buyers,” said Carlby Xie, head of research & advisory in North China at Colliers International.

“In the following six months to 12 months, I expect a further 10 percent to 15 percent price drop in Beijing’s housing market,” Xie continued. “Though I don’t know whether the price will drop to early 2009 levels, I still regard now till the end of this year as a good buying time for house shoppers.”

The tough property policies have greatly influenced the market, Xie added.

At the beginning of this year, the central government and related authorities commenced a series of policies intended to rein in the rocketing property prices.

The controls include increasing the deposit for a second house and credit loan suspension for a third house.

In addition, local families are banned from buying more than one additional home, and non-locals are not allowed to buy an additional home unless they have worked in Beijing for a year.

From June 1 to June 19, only 1,398 non-subsidized residential properties were sold in Beijing, down 79.5 percent on the same period last year, according to statistics from Beijing Real Estate Transaction Management Website.

However, most developers in Beijing denied they have adopted a price drop strategy and insist their recent initiatives are merely normal marketing promotions.

Feng Chun, a real estate investment consultant at No 8 Party House, a high-end service apartment project in Beijing’s Chaoyang district, said some Chinese media had misunderstood the company’s preferential policy.

“They reported we would drop the price by almost 10,000 yuan per sq m, but actually we just pre-paid the investment return (6 percent) to our buyers when they purchase the apartments, and in the following five years, they don’t receive any money at all.”

Tian Wei, saleswoman at Kylin Zone, which has been called “the most favorable discounted project in Beijing” by local media, said her company was merely conducting a regular marketing move, not a price drop.

Officials from China Vanke Co’s Beijing branch, also revealed Vanke projects in Beijing are unlikely to experience a significant price drop.

“Different regions should adopt different strategies. Currently, in Beijing, we don’t see any necessity to lower our property prices directly,” said a woman surnamed Shi from Vanke’s public relations department.

Jin Yong, senior managing director of northern China at CB Richard Ellis, explained why real estate developers are cautious about dropping price.

“If they openly lower the price, they may face pressure from previous home buyers, because they paid more to buy a similar product,” Jin said.

“These concerns lead developers to adopt covert price-reductions such as offering discounts or sending furniture as gifts, instead of cutting the price directly.”

Jin predicted that in the following months, there is a good chance that property prices will fall further, but that it depends on many factors such as inflation and a possible property tax.

When Liu Long stepped out at Kylin Zone, he felt the price was still too high for him.

“The buying time may be coming, but I need to watch and wait for the best opportunity,” he said.

Tens of thousands of people in Beijing obviously share a similar view as they joined a “Chaodi Yubei Dui”, or Team Preparing for Bargains in June.

The team was organized online on June 1 by, a leading property website in China. More than three million people supported the movement and around 200,000 people participated during the first three weeks of June.

“Half of our team members are from Beijing. We all believe that it may not be the best time to purchase a house in the capital now, but it’s time to get ready for it,” Yang Xi, editor-in-chief at, told METRO.

“Most are young people who want to purchase their first property in Beijing. We select and supply them with information and organize visits to discounted projects. It may help them find a suitable property as quickly as possible,” Yang said.

Source: China Daily/Asia News Network, 14 Jul 2010

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