Bloomberg News

China Home Prices Fall for Second Month in October, SouFun Says

November 01, 2011

Nov. 1 (Bloomberg) -- China’s home prices fell for a second month in October as developers started to cut prices to boost sales amid the government’s housing curbs, according to SouFun Holdings Ltd.

Home prices dropped 0.23 percent last month from September when they retreated 0.03 percent, the first in a year, according to SouFun, the nation’s biggest real estate website owner. Prices slid in 58 of 100 cities tracked by the company, including Shanghai and Beijing, it said in an e-mailed statement.

Premier Wen Jiabao said over the weekend the government will “firmly” maintain its control over the property market even as it seeks to “fine tune” other economic policies. The country’s biggest developers including China Vanke Co. have started cutting prices for some housing projects, 21st Century Business Herald reported today.

“It’s notable that price cuts have started in tier-one cities by big developers,” said Zhao Duo, a real estate analyst at Sealand Securities Co. in Shenzhen. “This will influence the smaller builders and force them to follow suit. Developers are realizing that only concrete price cuts will help home sales.”

The credit outlook for Chinese developers will be “increasingly severe” amid government efforts to curb rising home prices, Standard & Poor’s said in a report on Sept. 27. The government this year increased down-payment requirements and mortgage rates on some homes and imposed housing purchase restrictions in about 40 cities.

Zhuhai in Guangdong province is the latest city to impose restrictions on home purchases and prices. From today, price limits on new housing projects have been set at 11,285 yuan per square meter (10.76 square feet), while new housing projects priced above the limit will not be awarded licenses from authorities, Zhuhai Daily reported, citing the local government.

Shanghai, Beijing

Prices in Shanghai declined 0.44 percent, and those in Beijing slipped 0.23 percent, according to SouFun. Langfang, about an hour’s drive southeast of Beijing, posted the biggest drop of 1.59 percent, while Baoji, more than two hours west of Xi’an, climbed the most, adding 2.05 percent, SouFun said.

The “property market should worsen amid continued tightening,” Credit Suisse Group AG analysts led by Jinsong Du said in a report yesterday. “Most developers are not cutting property prices, but delaying or reducing the size of project launches instead. With the weakening market sentiment and delayed supply, we expect housing transaction volume to further decline in the next few months, which should further affect housing market sentiment.”

The Shanghai Composite Index’s property gauge swung between gains and losses at least six times today, declining 1 percent at the break.

Vanke’s Price Cut

Vanke, the nation’s biggest publicly traded developer, is cutting prices on homes in Beijing and Shenzhen projects, and plans to offer discounts to buyers in Huizhou and Dongguan in Guangdong province, 21st Century Business Herald reported, without saying where it got the information. Li Jun, an official at Vanke’s press department, couldn’t be reached at his office in Shenzhen.

Other developers reducing prices include Country Garden Holdings Co. and China Merchants Property Development Co., the newspaper said. Calls to the publicity offices of the developers went unanswered.

China’s property industry may undergo a “reshuffle” in the face of a severe market and policy environment, Ba Shusong, a researcher at the State Council’s Development Research Center, wrote in a commentary published in the Financial News with Hua Zhongwei and Yang Xianling.

Home prices in the most affluent cities may fall as much as 30 percent, they said, and property company growth will come from higher efficiency, differentiation and integration.

China is on “a bigger and faster treadmill” than ever as property sales slow, Jim Chanos, president and founder of $6 billion hedge fund Kynikos Associates Ltd., said in a Bloomberg Television interview from Singapore on Oct. 28.

Chanos has forecast since at least February 2010 that the property market will slump, saying that China is Dubai times a thousand and on a “treadmill to hell” because of its reliance on real estate.

--Jiang Jianguo and Bonnie Cao, with assistance from Penny Peng in Shanghai and Regina Tan in Beijing. Editors: Linus Chua, Andreea Papuc

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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