MANY Shanghai real estate brokers are facing such tough times, they are closing up to half of their city outlets.
A continuously shrinking transaction volume in both new and used apartments, coupled with a "wait-and-see" sentiment, has made the past July - the hottest in Shanghai in decades in meteorologic terms - perhaps the coldest ever for all industry players.
Hope Real Properties, a leading real estate brokerage company from southern Guangdong Province, has closed about one-fourth of its local outlets over the past two months.
Brokerage firm Resource Exchanging has cut half of its local presence amid slack business. Leading Hong Kong real estate agency Midland Realty has slashed about one-third of its branches across the city. And Mytophome, another real estate brokerage company from Guangdong Province, has closed about half of its outlets in Shanghai.
Sluggish period
"The situation is very tough at the moment, probably even more serious than 2005 when the local market also suffered a quite big correction," said an industry insider from a leading real estate brokerage company who preferred not to be identified. "Operational costs for big players are huge and everyone will be running out of cash quickly since fewer deals are reached during the sluggish period."
According to www.ehomeday.com, a real estate Website which compiles the city's monthly second-hand housing index, the transaction volume of used apartments dropped 20 percent in Shanghai last month, following a dive of 25 percent in June.
Statistics from the city's leading real estate agencies supported these results.
"Transactions of used apartments dropped 21 percent last month in terms of combined area, and most deals were secured in districts of Baoshan and Yangpu as well as Pudong, which jointly accounted for more than 50 percent of the total," Huang Hetao, an analyst at Century 21 research center, told Shanghai Daily.
And according to Shanghai Centaline Property Consultants Ltd, one of Shanghai's biggest players which runs more than 180 outlets across the city, transaction volume withdrew about 10 percent from a month earlier in July though prices remained stable during the same period.
"Most industry people agreed that the tough situation is expected to continue at least through the last quarter of this year," said Portia Lu, a marketing official with Centaline.
Meanwhile, Shanghai Hanyu Property Consulting Co Ltd, another leading real estate brokerage firm in the city, said the number of transactions of second-hand residential properties slid 27 percent last month.
The number of apartments sold plunged to 2,095 units in July, compared to 3,656 units in May and 2,820 units in June.
However, some brokerage firms have started to expand their new property sales business especially in the second and third-tier cities in the hope of riding through the current hardship.
For instance, new property sales now almost account for half of Hope Real Properties' total revenue, and a residential project in neighboring Zhejiang Province for which the company serves as its sales agent also received quite good responses from the market, according to Ye Houbiao, a senior official in charge of Hope's Shanghai operation.
The increase in second-hand apartment supply might also indicate that the downturn is not likely to end soon.
Yesterday, more than 121,500 used apartments were available for sale in Shanghai, according to www.fangdi.com, the city's official Website tracking real estate information. That compared to around 100,000 at the beginning of the year. Moreover, transaction volume fell since April, with 14,739, 14,208, 14,067, 12,895 and 9,656 units sold between March and July, respectively.
A more stringent credit control over second and multi-home mortgage applicants, which was introduced late last year by the central government, dealt the first major blow to the country's then overheated housing market.
And a bearish stock market, coupled with other unexpected happenings such as the snowfall in January, the heaviest in decades, all prohibited the housing market from a vital rebound, industry sources said.
Mortgage holders who apply for another home loan are required to make a down payment of at least 40 percent and pay a 10-percent premium on interest rates, the People's Bank of China and the China Banking Regulatory Commission jointly announced in late September.