The real estate market in Beijing is now experiencing a decline both in supply and demand, as developers followed each other to cut prices.
In a survey of about 80 on-sale housing projects, 82 percent of them have seen a price dip, with 38 percent them dropping by 15 percent, according to the Beijing Times.
"This situation, in which over 80 percent of house projects have had sales prices lowered, can be definitely regarded as a general slump in the market," said Yang Shaofeng, general manager of Beijing Conworld, a real estate brokerage firm.
The price cutting campaign was driven by lack of demand in the market, and the soaring supply of the policy-favored welfare houses dealt another blow to developers, dampening their willingness to start new projects.
On the commercial housing market, a total of 2,788 pre-construction units were sold in September, according to statistics from the Beijing Real Estate Trade Management website, which is the lowest monthly transaction volume in the past three years. They fell 76 percent from the same period in 2007 and were 29 percent lower than in August. The transaction volume of completed apartments came to 1,597 units, down 30.9 percent year-on-year.
Statistics from Yahao Real Estate show that the pre-sale prices of commercial residential houses averaged 13,640 yuan ($1,992) per square meter in September, 13.2 percent lower than August.
With an average price 4,000 yuan lower than commercial apartments, the welfare housing projects, like affordable apartments and price-limited apartments, saw their transaction volume soaring to 6,898 units in August as well.
Meng Qi, an analyst from Century 21 Real Estate LLC, said to the China Securities Journal that supplies of the low-cost welfare houses will increase in the fourth quarter, which will further impact the commercial real estate market, and intensify competition among developers for small-sized apartment projects.
Newly supplied apartments in September totaled 9427 units, 44 percent down against the figure of the same month last year. Pre-sale permits were granted to 51 housing projects last month, falling 10.5 percent year-on-year, and many developers intend to postpone their pre-sale plans to the next year.
According to Yahao Real Estate, there were only 46 housing projects entering the market in September, around 40 percent less than the same period last year. Merely seven projects are brand new ones with all the rest being previously started projects that are winding-up. However, high-end housing projects are a larger proportion of the total, accounting for about 48 percent.
The scarcity of high-end projects and a clearly targeted customer group made this sector less sensitive to market fluctuation, said Ren Qixin, vice general manager of Yahao.
An official with the Beijing Municipal Construction Committee, who declined to be identified, said to the Beijing News the market downturn was because of a self-adjustment process as well as a result of macro control. Over-priced housing projects should be adjusted to a rational level.
He also expressed that his committee's attitude toward the market is to make high-end projects marketable, to support the middle level projects and to ensure houses for the lower-income group.
Li Wenjie, general manager of Centaline China's North region division, pointed out in his blog that the real estate market has entered a second round of price reductions following the collapse of the Lehman Brothers, with the first round happening at the conclusion of the Olympic Games.
He expected the price cutting period to continue to the end of this year, until financial pressures eased at the beginning of next year.