Market insiders are expecting another wave of huge discounts by property developers in March after the first round last October, as an increasing number of developers are following the lead taken by Poly Real Estate Group (600048) after poor sales in January, reports xinhuanet.com.
The total transaction value posted by 16 major developers in January fell from 66.36 billion yuan recorded in the same month last year to less than 30 billion yuan, and transaction figures in February were reportedly lackluster.
Poly Real Estate recently lowered the price of one of its property developments in Shanghai from 19,000 yuan to 17,000 yuan per square meter, while upgrading the materials used in decorating the units. Including the cost of using better materials, the discounts given by Poly Real Estate hit 20 percent.
Following the price cuts by Poly Real Estate, China Merchants Property Development (000024,200024) reduced the prices of 22 developments nationwide by up to a maximum of 15 percent.
Other developers which had previously cut prices included China Vanke (000002,200002), Gemdale (600383), and Evergrande Real Estate (3333.HK).
At the end of last October, Poly Real Estate and Longfor Properties (0960.HK) were some of the developers which started offering discounts to boost sales.
According to a report by Credit Suisse, the willingness of Chinese consumers to purchase fixed assets over the next two years dropped to 16 percent.
The average price of new commercial residential homes in Shanghai in 2011 was 2.58 million yuan per unit.
According to the Shanghai branch of the Bureau of Statistics, the average annual disposable income of Shanghai residents was 36,230 yuan, and with average annual income of 100,870 yuan for a household of three, it will take 23 years and eight months for a local resident to purchase a home, assuming the resident goes without food and drink during this period.
According to Shenzhen World Union Properties Consultancy (002285), 35 percent of potential home buyers in 28 cities are hoping for a more than 30 percent fall in home prices.
At the end of 2011, 75 percent of the developments available for sale offered discounts of less than 15 percent.