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Shanghai housing boom turning to bust
By Samuel Shen and Irene Shen (China Daily)
Updated: 2005-12-15 06:50 'Selling spree'
The steepest declines since then have come at new apartment projects, as
developers such as China Vanke Co, Shanghai Shimao Co and Shanghai Industrial
Development Co try to raise cash to meet year-end bills and finance new
developments.
"Developers need to pay construction contractors at the year-end and balance
their books," said Chen Sheng, vice-director of the Shanghai Real Estate Index
Office. "That's triggered a selling spree."
The amount of new apartment space on sale in Shanghai jumped to 9.66 million
square metres as of Tuesday almost three times the 3.59 million square metres on
the market at the end of 2004, according to city government figures. Home sales
this year reached 26.8 million square metres by mid December about two-thirds of
the 34.9 million square metres sold in 2004.
"We had to cut prices in order to sell the remaining stock," said Qian Zheng,
sales manager at the development, which is asking an average of 9,300 yuan
(US$1,148) per square metre, down from 13,000 yuan (US$1,605) at the peak
earlier this year. "We need the cash for the development of another project."
Shimao Riviera Garden, a high-end project in the city's Lujiazui financial
district, reduced asking prices to 26,000 yuan (US$3,210) per square metre from
a peak of 36,000 yuan (US$4,400) in March. Vanke, the nation's biggest publicly
traded developer, cut prices for its developments in Shanghai by as much as 20
per cent in September to spur sales, according to board secretary Xiao Li.
Slowing demand has prompted some developers to offer
perks such as free plane tickets and air conditioners, while others are
guaranteeing refunds in the event of further price declines a tactic used by
Hong Kong developers after 1997, when the city's real estate prices slumped by
60 per cent.
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