After booming in recent years, China’s real estate market is finally starting to feel the pinch from sagging demand and tighter controls.
One of China’s biggest real estate agencies, Chuanghui Real Estate, has shuttered dozens of outlets in Shanghai and other cities, leaving angry customers and employees, after an ill-timed expansion just as the market was peaking. Many other agencies around the country have also closed down.
So far, the retrenchment appears to be mainly limited to property brokers. But the moves could herald the beginning of a broader slowdown in one of Asia’s hottest real estate markets.
The government has been wrestling to get control of the property sector, worried that rising prices for housing are pushing poorer Chinese out of the market at a time when overall inflation is surging.
Regulators stepped up curbs on the property market last year, alarmed that ‘bubbles’ in property prices could collapse and trigger a financial crisis. Those efforts are starting to take effect. While urban housing prices last month rose 10.5 per cent from a year earlier, a sharp slowdown in sales transactions in recent weeks suggests a new trend.
In the first week of 2008, home sales in Beijing fell 20 per cent compared with the previous week, the state-run newspaper China Securities News reported. Sales were off 38 per cent in Shenzhen and 52 per cent in east China’s Nanjing, it said.
Realtors say the slump started late last year but due to various reasons, like land supply and property hoarding by developers, the impact hasn’t been seen yet in prices.
So far, there are no signs of a mortgage meltdown in China similar to that seen in the US, and experts don’t foresee property prices to fall substantially. Strong economic growth and surging demand from upwardly mobile families are supporting demand.
But business is slowing, especially for the so-called ’second-hand’ apartments, or existing, rather than newly built homes, that are the lifeblood of local realtors in this recently commercialised market.
‘In 2008, we think property developers will face some liquidity problems and financing issues,’ Matthew Kong of ratings agency Fitch Asia Corporates said recently. — AP
Source : Business Times - 22 Jan 2008