A view of high-end properties in Shenzhen's Nanshan district. According to Centaline Property, prices of apartments in some areas in Nanshan district, where most of Shenzhen's luxury housing projects are located, extended their decline in May after having dropped for 13 weeks, with the falling rate hitting 33 percent. Provided to China Daily

Experts fear top-end properties will bear the brunt as the renminbi hits five-year low against greenback

Property experts have voiced concern over a depreciating renminbi, which hit a new low against the US dollar on Monday, warning that the currency's slide would pile downward pressure on Shenzhen's already sluggish homes market.

US Federal Reserve Chairwoman Janet Yellen's comments at Harvard University last Friday that an interest-rate hike over the next few months would probably be appropriate if economic data improves, have boosted the greenback against other major currencies.

The renminbi's central parity rate weakened 294 basis points on Monday to 6.5784 against the US dollar - the lowest level since February 2011 - according to the China Foreign Exchange Trading System.

Yan Yuejin, research director of Shanghai-based E-house Real Estate Research Center, warned that the mainland currency's weakness will have a knock-on effect on sales of high-end property projects in the downtown areas of first-tier mainland cities.

The yuan's depreciation may force investors to consider investing in more overseas projects to thwart the continuous drop in the value of their mainland assets due to a shrinking renminbi, he explained.

Following an 18-month rise of more than 50 percent, average prices of Shenzhen's secondary-hand apartments - the weather vane of the city's real estate market - began declining last month with the city government tightening its grip on housing policy on March 24 by lifting the down-payment requirement for second homes buyers to 40 percent to curb speculation.

According to Centaline Property, prices of apartments in some areas in Nanshan district, where most of Shenzhen's luxury housing projects are located, extended their decline this month after having dropped for 13 weeks, with the falling rate hitting 33 percent.

The data also showed that although 70 percent of second-hand homes owners in Shenzhen had priced down their properties last week, the transaction volume in May has dived more than 60 percent from the previous month.

He Qianru, director of the research center at Midland Realty in Shenzhen, however, was more optimistic, noting that investors' confidence in the city's luxury homes sector is actually picking up. She said up to 80 percent of luxury projects in the city have been sold in the past two months.

As for the overall property market, He said average prices of second-hand flats have halted their plunge and steadied at around 52,000 yuan ($7,900) per square meter since April.

She agreed that the reniminbi's depreciation has exerted heavy pressure on real estate developers who rely on foreign funds, such as those listed in Hong Kong or the US (as they have to pay back more if the renminbi continues to sag).

However, she pointed out that such developers account for only less than 1 percent of Shenzhen's total, "which is extremely small".

Yan reckoned that the yuan's depreciation has been within expectations and has proceeded at an "acceptable speed", adding that some developers have already moved to cut potential losses from currency fluctuations, such as by issuing corporate bonds.

grace@chinadailyhk.com

(HK Edition 05/31/2016 page11)