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Cooling market has home buyers waiting
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WHILE housing prices have started to fall in Hangzhou’s overheated real estate market in recent months, home buyers are still hesitant to buy because they are waiting for more price cut.
Though a second-tier city, Hangzhou has long been held toward the high end of home prices. Last year, commercial residential apartments in Hangzhou averaged 17,121 yuan (US$2,760) per square meter, while the average price in urban Hangzhou (excluding Yuhang and Xiaoshan districts) was 22,091 yuan per square meter.
The trend line is now turning down. The city’s overall average price in the first half of this year was 15,584 yuan per square meter — almost 13 percent less than the first half of last year.
“Oversupplied land development and fierce competition contributed to the price drop,” said Qian Minjie, an analyst at Living in Hangzhou, a leading real estate website in the city.
Houses in the eastern part of the city, especially near the Hangzhou East Railway Station, suffered the biggest price drop. Glorious Palace, a residential complex developed by Vanke Group, cut its price from 21,000 yuan per square meter to 18,000 yuan this month; East Fame by DoThink Group, which had already reduced its price earlier this year, now is promoting its 100 apartments with discounts of up to 200,000 yuan.
Also decreasing its prices in the block is Eternal Bustling by Xinyu Construction Group and Supertown International by Sunny-sky Property.
This is rare because usually the housing prices in urban Hangzhou are buoyant.
“The land in the eastern city was overdeveloped,” said Qian. “Now some of the companies sustain losses — they spent more than they earn. But they have to recoup funds.”
Xiaoshan District in southeastern Hangzhou is another “price reduction-hit area.”
One representative is the Love Apartments standing south of the Qianjiang River. The developer announced last month that its 90-square-meter apartments, with refined decorations, would be sold at no more than 8,000 yuan per square meter.
Not taking interior decoration into account, the cost of Love Apartment’s apartment would be around 6,500 yuan per square meter. Its neighbor just a kilometer away, Landscape Bay, sells undecorated apartments at 12,000 yuan per square meter — which itself is a price cut from 13,000 yuan in 2010.
Blooming Town, another development in Xiaoshan District, earlier this month set its price at 12,000 yuan per square meter to clear inventory, while last year the average price was 17,000 yuan.
Housing prices in Yuhang District and north urban Hangzhou are also abated. The falling trend has inspired some purchasers to wait and try bottom-fishing.
Figures from tmsf.com, the city’s official real estate statistics website, show that the number of new apartments sold across the city was down 30 percent year on year from January to June. The figure is almost 45 percent when counting only the urban area (without Yuhang and Xiaoshan districts).
“Seeing the price is falling, I feel fortunate that I did not buy too early,” said Li Jian. He planned to buy an apartment at the end of last year but delayed until now because he is waiting for prices to fall. Li said he has talked to many purchasers and he is not alone.
Figures from tmsf.com show the problem for home sellers: Inventory of new and second-hand houses for sale in Hangzhou is more than 132,000, while during 2013 the city in total sold 87,000 apartments. At last year’s rate, it would take a year and a half to “digest” all the apartments now on the market. But given the sales pace of the last six months, where sales are down 30 percent, it would take even longer.
Some developers are choosing to sit tight rather than try to sell in this market. During the first half of 2014, only 114 new residential projects in the city were put on offer, a 45 percent year-on-year plunge.
“They are waiting for more customers, and waiting for the timing — for example, for the city government to cancel the restriction policy on the number of homes people can own,” an insider told Shanghai Daily. “Or, they have to give a low price that makes little profit.”
The government policy is to curb the overheated market by imposing restrictions on purchasing power. Banks won’t provide loans for those who buy a third apartment, and will provide only 40 percent financing on second homes.
Earlier this month, the government in Jinan, capital city in eastern China’s Shangdong Province, canceled its restriction policy, and developers in Hangzhou are expecting similar news.
“To cancel the policy will not be a bailout, but at least it will bolster those villas and luxury mansions to be sold,” said Qian.
The price reduction is not limited to Hangzhou. According to the National Bureau of Statistics, China’s property sector continued to cool in June, with new home prices falling from May in 55 of 70 major cities.
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