Developers sweeten deals to attract buyers

Property developers in two of China's weakest housing markets are offering to buy back homes above the purchase price to boost sales as demand slows.

In Hangzhou, where home prices fell the most in May among 70 Chinese cities watched by the government, Shanheng Real Estate Group is giving homebuyers an option to sell back their apartments in five years for 40 percent above the purchase price.

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In Wenzhou, DoThink Group is offering to repurchase homes at three of its projects for 120 percent of the purchase price after three years.

The offers are the latest strategy by developers across China, including reducing prices, delaying project launches and offering incentives to potential buyers, as they seek to maintain sales targets.

Prices of new homes fell in May from April in half the 70 cities tracked by the government, the largest proportion since May 2012, according to government data.

A more persistent and sharper downturn in the property sector is the biggest risk for China's economy in the next couple of years, according to UBS AG.

"Obviously they're relatively cash-thirsty," said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. "If it works, there surely will be other developers following suit."

China's home sales slumped 10.2 percent in the first five months of this year from the same period a year earlier amid tight credit and an economic slowdown, reversing last year's 27 percent jump.

The average new-home price in 100 cities tracked by SouFun Holdings Ltd fell 0.5 percent in June from the previous month, accelerating from the 0.3 percent decline in May that ended 23 consecutive months of gains.

For closely held Shanheng Real Estate, which is controlled by Shanghai-based clothing maker Shanshan Group Co, the buyback offer helped attract more than 1,000 potential buyers to its Yishanjun project, a half-hour's drive from downtown Hangzhou during the three-day Dragon Boat Festival holiday that ended June 2.