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Visitors talk beside a building model at a real estate trade fair in Nanjing, Jiangsu province, in September. Dong Jinlin / For China Daily
Real estate developers are lowering their expectations for 'Golden September and Silver October' as fewer homebuyers turn out, Zheng Yangpeng reports.
September and October are as important to China's property developers as Christmas is for retailers in the West. Potential homebuyers are more likely to buy during these months, commonly known in China as "Golden September and Silver October". The sales campaign is fierce: Newspapers are full of ads for new property projects; brochures are frequently being handed out to passengers on the subway; and the story of how developers raced to launch newly built projects earlier this month have become the common fare of radio programs. Meanwhile, public data show that the sales battle has intensified.
Based on the presale permits granted to developers, Hexun, a financial news website, estimated that 55 projects will come on the market in Beijing this month, a record high for the year.
By comparison, only two projects went on sale in August.
Insiders said developers simultaneously slowed the pace of new releases in August, as they sought to save their best projects for the September-October period.
But despite all the excitement, it seems increasingly as though developers are fighting the battle halfheartedly.
Wang Tong, a public relations manager with a major real estate developer, said his company will roll out a raft of new projects this month, just like the other property outfits.
However, he insisted the company isn't pinning all its hopes on September and October.
"We don't expect the number of transactions to surge dramatically during these two months," he said.
Potential buyers have fallen into two distinct camps. Some plan to loosen their purse strings during the two-month period because they fear that prices may continue to rise in the foreseeable future.
Others say their willingness to buy has been dampened by rising prices, so they have adopted a wait-and-see attitude.
In a poll conducted by Soufun, a major property website, 30.23 percent of respondents said they planned to buy a house during the two-month period. Meanwhile, 51.16 percent said they will make a decision based on changes in house prices.
Wang said the developers' ability to supply was undermined by an unexpected buying spree in June.
"Many developers saw their highest turnover in June, and the buying fever continued into July and early August. As a result, the stock of homes available has declined rapidly during the past three months, constraining the developers' ability to push out new homes in September and October," he said.
The turnover statistics released so far seem to confirm the predictions of developers and industry experts.
Centaline Property Beijing, a real estate brokerage, reported that in the first two weeks of September, 119,581 deals in 54 cities were recorded online, a decline of 11.6 percent compared with the same period in August.
In fact, house sales had shown signs of weakening in August, with 262,416 units sold in the 54 cities monitored by Centaline. Sales declined by 5.7 percent from July, the month that saw the highest turnover so far this year.
In Beijing, which saw above-average growth in turnover and prices, the market is cooling at an unexpectedly rapid rate.
Recorded online transactions fell 24 percent in the first two weeks of September from a month earlier, according to data from the local government.
During the same period, sales in Shenzhen, Guangdong province, fell 9.6 percent from a month earlier.
Figures from the China Index Academy, the research arm of Soufun, China's largest property website, confirmed that trend. Of the 20 cities monitored by the index, the number of weekly sales in the first half of September dropped by 12 to 13 percent from a month earlier.
He Tian, director of the China Index Academy, said the time lag between purchases and online registration was the reason behind the September decline, and not all the sales made during the period are reflected in the data.
Rising prices are another limiting factor. "Whenever the price of a housing project rises, sales fall. The effect is very straightforward," said He.
Despite the month-on-month decline, September sales have been stronger than a year ago, according to the China Index Academy.
Market hit a wall
China's property market hit a wall last year when the government implemented a house-purchase limit at the municipal level. In Beijing, for example, that meant a family with one house was only allowed to purchase one more residential property after February 2011.
Those hoping to see discounts during the campaign season are likely to be disappointed. Developers and industry experts said there are few opportunities for large-scale price cuts.
Wang, whose company mostly sells medium- and high-end properties, said "trade-up houses" - where people buy homes with greater floor space, a better location and a higher price - will be the main focus of the season.
"Our market-monitoring system shows that people with 'trade-up' demand are highly likely to make their purchase during these two months. Compared with first-time buyers, they are less price-sensitive," said Wang.
Some developers said they would not lower prices excessively.
"Except for a few cash-strapped developers, I don't think many will give in on price," said Xiang Wei, marketing manager at a property company he declined to identify.
Experts agree that a nationwide price surge is unlikely.
"Because a large inventory still exists in cities such as Tianjin and Wuhan, the upward price pressure will not be high," said He Tian of the China Index Academy.
"But for cities such as Beijing and Shanghai, where there are fewer house available, upward pressure in the next year will be huge, especially for properties in good locations."
However, Hu Jinghui, vice-president of the real estate service company 5i5j Real Estate, said that in the next 12 months, the chances of a price surge in Beijing are low, given that developers bought a large amount of land in 2011.
According to Hu's analysis, the supply of land available for purchase for residential properties was 8.13 million square meters in 2011. Most of that will translate into 80,000 housing units in the second half of this year and first half of 2013.
"Combined with another inventory of 80,000 (bought pre-2011), 160,000 units of housing supply is large enough to satisfy market demand. Therefore, a price surge is unlikely in the coming year," Hu said.
'The battle to come'
As the media shines its spotlight on a possible boom in turnover, developers are quietly eyeing the battle behind "Golden September, Silver October".
Major developers are accelerating purchases of land parcels, as their inventories fade and the price of land remains relatively low.
From Sept 5 to 7, seven major real estate developers bought land parcels worth 8.44 billion yuan ($1.34 billion) in first- and second-tier cities, according to industry data.
China Vanke Co, the country's biggest property developer in terms of market value, paid 4.67 billion yuan for two parcels of land in Guangzhou and Hefei on Sept 5 and 6.
Moreover, the floor space of newly constructed homes is increasing and property investment is rebounding.
From January to August, the area of newly constructed homes fell by 6.8 percent, compared with a year earlier. That's much lower than the 26.7 percent decline in the first seven months, according to the National Bureau of Statistics.
That suggests a strong rebound in August, but it's difficult to assess because the NBS does not release figrues for individual months.
From January to August, property investment increased by 15.6 percent, according to the NBS, 0.2 percentage points higher than the combined figure from January to July.
Developers increasing their reverses of land, a larger area under construction and rising investment indicate growing confidence within the property industry, according to analysts.
"Although the central government vowed to put strict house policies firmly in place, the last round of increases in prices and turnover (late May to July) did not trigger tougher policies. In some ways, the policy is actually relaxed, as lower interest rates improve access to mortgage credit," said He.
This, along with improved liquidity for developers, has boosted confidence and developers will continue to add to their land reserves.
To spur a slowing economy, the People's Bank of China cut interest rates in June and again in early July. Market sentiment changed quickly and house sales and prices rose.
However, a widely anticipated third cut in rates - which would further reduce the cost of borrowing - did not materialize in August.
But an increasing number of potential homebuyers are convinced that rates will be lowered again this year. That expectation has seen many hold off on their plans to buy.
On the supply side, He of the China Index Academy forecast that developers will maintain the current pace of new project releases in the "post-Golden Season" because they are driven by a desire for handsome results as year-end approaches.
The increase in supply and demand will help sales to keep rising through November and December, while prices will rise moderately, said He.
"Actually, the traditional busy and off seasons no longer fit today's reality. Property-related policies wield a much larger influence," said Gu Yunchang, deputy head of the China Real Estate and Housing Research Association.
"Consumers will buy homes at any time if they think the price is reasonable, but they won't if it isn't, even during a busy season," said Gu.
Two visitors look at house information at a real estate agency in the Chaoyang district of Beijing. Despite the month-on-month decline, September house sales have been stronger than a year ago. Luo Xuguang / Xinhua
(China Daily 10/04/2012 page1)