HK Developer Wharf Hints at Further China Housing Discounts

Hong Kong real estate powerhouse Wharf (Holdings) hinted that more discounts could be on the way for its China projects as even the strongest property companies become troubled by the country’s home sales headwinds.

The 128-year-old Hong Kong conglomerate has already reduced prices to move residential units in some of China’s most overbuilt markets including the eastern Chinese city of Changzhou in Jiangsu province, as well as in Chengdu in southwest China’s Sichuan province.

Now, the Wall Street Journal has revealed that a top Wharf executive thinks discounts may become commonplace in what was once the most confident of the world’s housing markets.

“There are many cities where housing sales aren’t strong. It’s very common,” Wharf vice chairman Andrew Chow told the Journal.

However, Chow also expressed hope that conditions could improve later this year with the potential lifting of market controls imposed by the government.

“We’re expecting local governments to loosen property curbs in the coming months,” the Journal quoted Chow as saying.

Wharf has over 50 real estate projects in China, spread among the residential, office and retail sectors.

Discounts Without Borders

Reports of discounting on real estate projects are becoming increasingly common in China after cases of price cuts were first reported in Changzhou and Hangzhou during February.

This month there have already been reports of discounts spreading into the country’s largest cities, including Beijing and Guangzhou, where prices have general seen the strongest growth.

Market Slowdown Pressures Developers

Housing prices have slowed in recent months with figures showing that housing prices rose an average of 10.04 percent nationwide last month compared to the same period in 2013, down from a rate of increase of 10.79 percent in February and 11.1 percent in January.

Perhaps of greater significance to the market, the number of homes being sold appears to be dropping precipitously, which could put significant pressure on developer cashflows and lead to further discounts on home sales.

According to Century 21, the number of second-hand homes sold in China’s first-tier cities dropped more than 50 percent year-on-year in the first quarter.