2014-08-28

Event Horizon Approaches for China's Real Estate Market as Inventory Climbs


This picture shows the Chinese housing market. On the left are the existing property owners who might protest if prices drop, on the right is credit market set to swallow up developers if they cannot recoup their capital and repay debts. The developer response to this difficult situation is to follow Circe's advice and steer closer to Scylla (the home owners). To wit:
Double trouble: China property launches to deepen inventory overhang, price declines
Property launches in China are set to surge in the latter half of the year with developers sticking to their schedules despite mounting inventories, spelling double trouble for a market hammered by months of falling prices.

Price cuts were coming no matter what, but the need to stay as far away from Charybdis as possible makes for an even worse market:
Earlier this month, Kaisa Group and China Merchants Land confirmed that they planned to launch around 70 percent of their 2014 projects in the second half. Country Garden said it aimed to meet 60 percent of its sales target during the period.

......Inventories rose 8.4 percent as of the end of July from March, when the industry correction started to gain traction, according to Reuters calculations based on data from China Real Estate Information Corp (CRIC).

The latest count by the Chinese press puts inventory at 3 million square meters across 35 cities. Firms in Beijing are already cutting prices via their sales staff to hide the cuts from the wider public, in what are dubbed "internal sales." Chinese analysts are talking of "inevitable" price cuts waves that could see prices of new developments from big name developers cut 20% to 30%.

If this breaks bad, the fallout is not going to be limited to the Chinese market. Fortunately, insurance is cheap at the moment.

From iFeng:
内地35个城市库存3亿平方米 全国性降价潮将来临
August 25, at the launch of regular financial platform recruit Ali treasure same day, Taobao Vanke announced high-profile collaboration, "Taobao users throughout the year how much money to spend, you can in 12 cities nationwide Vanke Property 23 direct offset mortgage, the highest Deductible 2 million yuan. "

"Essentially equivalent to markdowns, Vanke start layout in advance 'Golden September' sales. Promotional rate averaged about 3.5 percent of the total price, and our tips 'Golden September' prices are expected to downstream 0-5% qoq consistent." quiet whip gold real estate analyst said.

In real estate the traditional sales season, " Golden September and Silver October , "Before the advent of a lot of housing prices in brewing a new round of markdowns action.

Price war on the eve of

During the conference, participated in Greentown interim results in Hong Kong, a media reporter to Sunhongbin joked, "If I find you to buy Greentown Hangzhou house, you can play a few fold? "Sunhongbin silent for a moment, responded that" I do not look directly to the project can play Qizhe. "

Sun Hongbin explained, "I have to say Greentown house price is not justified, but not say the price, the price is sure to follow the market, so the price of that (people buy a house) a good opportunity. Media can not kidnap us, and made us with a fool like, others are dropping their prices, we will give the guard at that. "

In the Song Weiping era, Greentown China [ -3.57% ] adhere to the "no price" image has gained. But times have changed, according to informed sources, Greentown China has begun to cut prices of its multiple projects in exchange for sales.

Real Estate traditional sales season, "Golden September and Silver October," before the advent of the price of housing prices need to find a "good reason." Has been on the market more sensitive Vanke boss, choose to embrace the Internet by way of lower prices. It is reported that China Vanke activity time cooperation with Taobao, 2014 August 25 to September 30. Preferential quota calculation method is to take the amount of consumption Taobao users over the past year, that is August 1, 2013 to July 31, 2014 shall prevail.

Sang Yu Feng, director of the real estate market in the 21st Century Development Center, on the surface, this is a Taobao Vanke and marketing activities, but is actually a disguised price cuts Vanke. Property during the previous two rounds of adjustments, Vanke have carried out prices, 2008 was the first to cut prices and triggered protests owners. But Yu Liang, President of Vanke on August 18 interim results conference, said Vanke, adjust the real estate market is to have a complete cycle, if the adjustment is not in place will bring more chaos, therefore, hope that the market adjustment can stick . In other words, Vanke's judgment is, the real estate market will continue to adjust, Vanke price action is carried out accordingly.

Sang Yu Feng believes that Vanke's actions have symbolic significance. Second and third tier cities in the country in general to cancel the purchase under the background of real estate to the inventory situation is not ideal, real estate listed companies in the report are quite ugly, if in the upcoming September-October season, it can not be harvested, the whole year performance guarantee.

Agile clear that the interim results conference, in the second half, Agile's multiple projects will continue to introduce new products, mostly for first-time buyers or just need to improve the type of demand product. Prices, Agile will continue to take a flexible marketing strategies and reasonable pricing, in order to complete the annual sale target of 48 billion yuan. Agile past month continuously in Beijing tourism real estate marketing activities.

21st Century Business Herald reporter also learned that a well-known housing prices are through the "internal sale" prices start low-key way in Beijing. As long as the staff presentation, you can enjoy the so-called internal price and down payment installments. The "internal sale" is essentially a price.

National price surges

Sang Yu Feng believes that the advent of a nationwide wave of price cuts will be inevitable.

With policy advice Research Department data show that as of the end of July 2014, the monitoring of one, two, three, four lines 35 cities, commercial housing inventory balances for accumulated 302.16 million square meters, the chain rose slightly by 2% year on year increase of 39 %; 35 city cumulative sales ratio of 22.58 months, growth of 3%, an increase of 61%. In major cities generally face "to stock" pressure, how to accelerate the run volume is still the primary problem is the developer.

Consulting Zhang Hongwei, director of research with the policy that the "bailout" policy effect is not obvious in most cities. Housing prices listed annual results press the top, is bound to take corresponding measures to rush in the harvest "golden nine silver ten", in September-October to increase efforts to push the plate. Moderate price strategy adjustments, become an inevitable choice for most housing prices.

Taking Beijing as an example. According to Asian high statistics show that in September Beijing commercial housing market is expected to have 39 projects into the market, is expected to hit a new high this year to monthly. Among them, many years of deliberation, real estate is also prepared to enter the market. Located between North Third Ring Jimenqiao Paul 利海德 park model recently opened, the main unit is about 175-305 meters flat villa mansion, villa of about 400-460 square meters of urban homes, using pure British style of Victorian architecture.

Deputy General Manager of Asian high high Shan analysis, September Beijing supply surge of the other reasons is that a lot of housing prices in the first half did not complete the sales target, the project had to accelerate the rhythm of the push plate, adjust pricing strategies in order to complete the annual sales plan. From September market project pricing, although Beijing has basically liberalized sale price, but the "prudent" market is still the main tone.

Has announced the price of the project, the pure product sets new disc is still in East Lake residential product, the estimated price of only 16,500 yuan from / square meters, is the lowest price of the project area. Fangshan plan listed several residential projects, including pure new disc five and Vanke Changyang world, old projects Rakhine State Terrace, quoted at 19000-22000 yuan / square meter, the basic return to the same period last year. Outside the Fourth Ring Road in Chaoyang District, southern landscape project hardcover existing homes to 36,500 yuan / square meter of low-cost market, achieved in July apartment sales of more than 20 sets. The project is the main unit is 150 square meters -170 square meters, there are some existing homes villas products.

Zhang Hongwei think, from the current market performance, the national property market a wide range of "price boom" is coming. Inevitably, some large enterprises in brand development project will appear 20% -30% of the market behavior slashed prices and real estate prices will be more and more.

No comments:

Post a Comment