Lower down payment to reduce supply of housing

Updated: 2012-02-28 11:12

By Wang Ying (China Daily)

  Comments() Print Mail Large Medium  Small 分享按钮 0

SHANGHAI - At various apartment projects across the country, developers are making it possible for homebuyers to put down a 10 percent down payment for a residence rather than the usual 30 percent.

Many observers said it's a sign that cash-strapped property developers are under pressure to reduce their inventories and replenish cash flow.

As the real estate market tilts in the favor of buyers, property developers in Guangdong, Hubei and Anhui provinces have gone so far as to provide upfront to first-time homebuyers two-thirds of the down payments that they will need to buy residences.

"Usually, you have to pay a minimum down payment of 30 percent to buy a house for the first time," said a salesman at an apartment project in Huizhou, Guangdong province, who only provided his surname, Zhuang.

"But there will be a larger discount if you buy an apartment before the end of the month. You will only have to pay a 10 percent down payment."

Zhuang said the remaining 20 percent required for the down payment will be advanced by the developer. So long as a homebuyer pays the money back before the project is completed in March 2013, he or she will not owe interest or extra fees.

"The special offering is only for local first-time homebuyers or people who have lived in the city and paid taxes for more than a year," Zhuang said.

Such promotions have been well received by the market. Take the case of an apartment project in Shenzhen, Guangdong province, that also provides the 10 percent down payment. Sales representatives there managed to sell out most of the project's more than 600 apartments in less than a week, said one of the salesman, who declined to provide his name.

As the property market continues to tread water, an increasing number of developers are looking for ways to circumvent government restrictions on property sales, analysts said.

"There are still a lot of first-time homebuyers looking for bargains who cannot afford a 30 percent down payment," said Huang Zhijian, executive director of the Shanghai-based Uwin Real Estate Research Center. "Developers can claw back a substantial part of an investment from them."

Huang said such offers had been made in Shanghai in the past. Advertisements for similar deals were seen in the city in late 2008, when the housing market was in a downturn.

"Such promotions won't greatly affect the whole market because they will test developers' capital resilience," said Hui Jianqiang, research director of Beijing Zhongfangyanxie Technology Service, which provides information on the real estate markets.

"To be more specific, only developers with a comparatively strong capital flow are daring to advance a 20 percent down payment to homebuyers in the hope of winning a larger market share," Hui said.

"I do not foresee that developers will face great risks by taking part in these promotions, especially because none of the housing projects that have been advertised as having discounted down payments have been completed yet," Huang said.

"Homebuyers can only officially own a house after they've paid the full 30 percent down payment."