2014-05-21

Beijing Real Estate Price War Begins in the Suburbs

According to the latest news, new homes are selling at discounts of 10% or more in the Beijing suburbs of Tongzhou, Daxing, Fangshang and others. One developer described the situation as one of a large increase in supply combined with a sudden drop in demand. Price cuts are the only way to attract buyers. Another developer expects prices could drop up to 20% in these areas later in the year.

One example typifies the situation, a project began selling in February at ¥23,000 /sqm. The 600 homes on offer sold out in 1 hour. In May, the next round of homes was offered at ¥21,000 /sqm, a nearly 10% cut in price, but after half a month on the market they have yet to sell out.

Another case in Daxing: the developer offered some "special homes," but in reality they cut the prices on the properties already on the market, from ¥36,000 /sqm to ¥28,800 /sqm, a 20% cut. This occurred in the Yizhuang section of Daxing, which is also where No Money Down Comes to Beijing. A Vanke property in the district is selling at a 17% discount from its opening round price, another is selling at an 11% discount.

Centaline's research director Zhang Dawei says prices in Daxing are still high because they ran up on news of a second international airport being built in the district (latest: Beijing Plans to Spend $14 Billion on Second Airport); Zhang says prices have increased about 50% since 2012.

Aside from a lack of buying interest, there is financial pressure on some developers. In one case, K2 Real Estate is reported to be selling some old property at a 50% discount to the area, ¥17,000 /sqm versus the ¥30,000 /sqm price for some new homes. The sales price even falls below that of some existing homes. According to a sales agent cited in the media, the developer has not paid the construction firm for the building and needs to recoup capital. The developer denies the report, claiming the sales person has combined the sqm price for the home with the sqm price for the basement, which ranges from ¥6,000 /sqm to ¥10,000 /sqm, to arrive at a lower total price. K2 says the two prices cannot be combined. It is a great story for selling homes in the current environment; buyers (and the media) will easily believe a tale of a developer in financial straits looking to quickly dump property. This creates the sense of urgency that buyers are currently lacking.

Inventory is slated to rise in Beijing based on existing construction and the situation is expected to continue into the first half of 2015.

北京郊区开打“价格战” 多楼盘降价超10%
销售员自曝:甩房回笼资金 K2地产回应:抵房降价不实

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