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Shanghai house sales see declining trend

By Jin Jing (China Daily)
Updated: 2008-07-23 09:28

Housing prices in shanghai has shown signs of decline, with some luxury apartments in the city center seeing a cut in prices while potential buyers remain uncertain on the timings of making a purchase.

Many potential buyers in Shanghai are waiting for a price plunge following the drop in Shenzhen housing prices, which declined by nearly 30 percent in the first half. Statistics from China Real Estate Index Academy showed that the housing sales in Shanghai in the first half dropped 27.6 percent from last year to 8.85 million sq m while housing prices rose a slight 7.26 percent.

Hu Yinghua, a researcher at China Real Estate Index Academy, said that Shanghai's real estate market was entering a mild correction period while the government was striving to keep the property price stable without large fluctuations.

Chen Wei, senior director of residential project marketing services at CB Richard Ellis told China Daily that the Shanghai property market was expected to receive a correction by around 10 percent in the second half, beginning with a price drop.

"It also depends on when the real estate developers are willing to lower the price," said Chen.

Meanwhile, many real estate developers are taking firm stances not to lower the housing price, despite the shrinking sales, which will eat into their profits and are likely to cause corporate capital liquidity problems.

A source in a Shanghai-based real estate developer told China Daily that many property developers are planning to keep the price at the current level through the third quarter, as they believe there will be a sales recovery after this period. "If the sales still thin after the third quarter, the housing price will probably decline," the source said.

Market insiders said that the price is expected to fall because of the large supply in the second half. "The increasing supply of apartments in suburban Shanghai in the second half may lead to the average housing price decline," said Chen at CB Richard Ellis.

For Example, Shanghai Greenland Baoshan Real Estate launched a new housing estate near the outer ring, Lvdi Linghai in Baoshan District on June 27, with the opening price of 7,600 yuan ($1,114) per sq m, around 20 percent lower than the average price of its neighboring buildings.

"But the building prices in the downtown area is expected to remain stable due to the decreasing supply of land available for development," Chen added.

The number of potential buyers that went to look for apartments in Shanghai's real estate agency was cut by two-third starting from mid-June, according to Uwin, the real estate information provider.

Xue Jianxiong, chief analyst at Uwin, said "Shanghai's housing price was expected to go down 10 percent in the third quarter this year because of the large supply and the shrinking demand." There is an expected 6 million sq m of new supply in the second half and there still remains around 1 million sq m of unsold in the first half.

"While the price run up in Shanghai has been less severe than other cities, all buyers remain cautious. In the second-hand market, sellers now entice buyers with all-inclusive packages, by sweetening the deal with all relevant taxes pre-paid by the seller," said Kenny Ho, head of research China at Jones Lang Lasalle.

"But the individual property owners are not expected to largely slash prices because most of them have no liquidity pressure, unlike many real estate developers, "Ho added.

The opening price of some luxury apartments in the central city has seen a decline. Regency Park, developed by Hong Kong-based Hutchison Whampoa Real Estate, was sold at an average price of 33,806 yuan per sq m in the first two weeks after it opened 162 apartments on June 6, down 24.4 percent from the average price between Jan 1 and June 5. Though the company attributed the price decline to the poor location of the apartments, the 10,000 yuan per sq m price drop gave potential buyers a ray of hope for a housing price correction.

"The less buoyant buying sentiment was also true of the high end and luxury segments, causing the typically slow winter buying season to drag on through the spring," said Ho.

Prince Hills, with the average price of 60,000 yuan per square meter, offered 44 new units for sale on April 28 , but only 7 of them were sold as of June 18. Of the 147 units launched in April, Bund Side in the downtown had only sold 17 by mid June.

However, the price of most luxury apartments remained strong despite the weak market sentiment. The high-end residential apartments posted a 1.6 percent rise in price, and the price of luxury apartments jumped 1.7 percent.

"The prices of luxury villas are expected to rise 6 to 8 percent on average in the next half of 2008 because of the scarcity and strong market demand, "said Chen.