Housing developers resist price cuts until 'cornered'

Shanghai Daily, March 28, 2011

Potential home buyers waiting for an appreciable drop in property prices may have to bide their time longer than they anticipated. There's no sign yet that property developers are capitulating on price despite a relentless government crackdown on the housing market.

At the recent Shanghai Spring Real Estate Exhibition, considered a barometer of the city's property market for the coming year, exhibitors were fewer, discounts were minor and only 20 percent of residential projects - all in outlying areas - cut their prices.

So it's not surprising that many visitors to the four-day event came away disappointed.

"It just took me less then 40 minutes to go through all the exhibits because major developers like China Vanke, Poly Real Estate, Gemdale Corp and Shanghai Greenland were all absent this year," said Daniel Wu.

Anxious to be among the first to scoop up any bargains, Wu went to the exhibition early on the first day. Like many others seeking to buy homes, Wu assumed that the government's latest curbs on mortgage rates, down payments and multi-home ownership would have forced prices lower. But not so far as he found out.

"It seems to me that the majority of real estate developers are still firm in their prices at the moment," Wu said.

Only about 60 local real estate projects, both residential and commercial, were displayed at the exhibition, which closed on March 20. Nearly 300 projects were exhibited at the exhibition a year ago, according to Soufun.com, the country's leading real estate website.

"While transaction volumes of new homes have been slashed since late January, when a series of tougher government restrictions were introduced, developers still remain very cautious and most of them are taking a 'wait-and-see' attitude," said Gong Min, a research manager at Shanghai Centaline Property Consultants Ltd, operator of the city's largest estate chain in terms of transaction value.

"However, developers will inevitably encounter rising capital pressure if the market remains sluggish," Gong said.