Property developers are slashing the prices of new residential and office buildings around China as real estate prices continue to fall.
The recent price-cut campaign was launched by a leading property developer, China Vanke Company Ltd., and had caused a snowball effect in China’s real estate market.
Another leading real estate developer, Hengda Real Estate Group is following suit and plans to lower its prices on 13 newly opened residential and office buildings across China. One expert said that Hengda’s move would trigger another nationwide price-cut war on residential and office buildings.
Hengda Group will offer a 15 percent discount on 13 new residential and office buildings across China from September 29. An insider confirmed that Hengda Group hoped to make billions of yuan from selling all 13 buildings at the same time which amounts a total of over four million square meters of housing.
According to a National Business Daily report, a regional marketing general manager of Hengda Group confirmed that its aggregate area on sale would be from four to five million square meters, and the prices would be close to the cost of production. The general manager said however, that the company wouldn’t lose money.
A staff member of Hengda Group’s Nanjing Branch said, “Since leading real estate companies were offering a price cut, including Vanke Group, it was high time we followed suit. We had no other choice.”
Real estate experts have predicted that within a month Hengda will further cut their prices much closer to their cost price in some major cities, where real estate sales have been stalled .
On September 5, Hengda took the lead by launching a discount campaign on apartment buildings in Nanjing City, Zhejiang Province. The prices for undecorated houses or apartments at Hengda’s Oasis Garden ranged from 4,600 yuan (US$672) to 5,000 yuan ($730) per square meter. These prices were the largest price cuts in Nanjing this year, about 35 percent lower than the price certified by the Price Control Administration of Jiangning District, 7,480 yuan ($1,092) per square meter.
In addition to Vanke Group, Hengda Group and Dahua Group, more big real estate developers including China World Trade Corporation, Guangzhou Star River, have started to lower their housing prices with various preferential initiatives.
On the other hand, some experts said some real estate developers didn’t launch their price cut campaigns until now because sharp price cuts could trigger a wave of contract revocation among recent purchasers. They said it could have negative impact on the company’s image and business development.
The stagnancy of property market, coupled with dwindling turnover, has directly impacted the real estate brokerage business. Many big real estate brokerage firms in Shanghai have experienced a loss ranging from one million yuan ($146,000) to 10 million yuan ($1.46 million) in the past three months. The number of real estate brokerage firms has also decreased from 12,000 plus last year’s highest sales to just less than 8000, with a bankruptcy rate of 30 percent. As a result, the situation is very serious.
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