Chinese Developers Self-Rescue With Price Cuts

Chinese developers under pressure from the coronavirus slowdown will self-rescue by attracting customer cash. If the market doesn't return to normal in March, expect aggressive price cutting across the industry.

iFeng: 房企促销“自救”：目前唯一能撬动客户的只有降价

Zhang Dawei said that if the epidemic could be eased in February, the pressure on housing companies would be relatively manageable. Once the epidemic spreads to March, due to the pressure of debt due and the cash flow of sales sharply reduced, some real estate enterprises, especially those with high leverage and expensive capital, would be unable to carry it, and the enterprises must save themselves.

Yan Yuejin, research director of the Think Tank Center of the E-House Research Institute, said that Evergrande's approach has inspired other housing companies and proactively provided preferential housing conditions to occupy the market. It is expected that the following major real estate companies will follow up, grabbing customers through price reductions and preferential promotions is the key content.

Sales are off amid the coronavirus shutdown:

Behind the big sales promotion is the grim situation that housing companies face in the first quarter.

On January 26, the China Real Estate Industry Association issued an initiative to effectively prevent the spread of the new crown pneumonia epidemic, and advocated that real estate development enterprises temporarily suspend sales activities at the sales office and resume after the epidemic. Previously, the competent units or industry associations in Ganzhou, Chengdu and other places issued a document requesting that the sales office be closed during the epidemic prevention period.

The list of "Top 100 Real Estate Companies in China in Sales in January 2020" released by Kererui shows that in January 2020, the sales thresholds of each of the top 100 real estate companies in the list decreased year-on-year. As of the end of January, the threshold for the sales of TOP50 real estate companies was 2.53 billion yuan, a maximum of 27.5%; the threshold for the sales of TOP100 real estate companies decreased by 19.1% year-on-year to 900 million yuan. From the situation of the top five housing companies, sales of Vanke and Country Garden increased by 16.1% and 0.12% year-on-year, respectively. Sales of Evergrande, China Shipping, and Sunac fell by 5.7%, 20%, and 22.6% respectively in January.

At present, more than 20 provinces (autonomous regions and municipalities) have suspended the opening of sales offices, stopped construction sites, and suspended intermediary stores. Zhang Dawei said that the epidemic situation has not eased and the market is unstable. It is estimated that from late January to February, the transaction volume of the national real estate market fell by more than 80%.

Evergrande has already fired the first shot.

SCMP: China Evergrande slashes prices of new flats by a quarter as coronavirus leaves developers struggling with plunging house sales

China Evergrande, the country’s third biggest builder by value, said it will kick off a one-and-a-half-month campaign offering discounts of up to 25 per cent at all of its projects across the country.
The company, chaired by China’s third-richest person, Xu Jiayin, said in a statement that “to cope with the changes of the new period, Evergrande will offer special big discounts at all of our projects, starting from February 18.”