The developer of a high-end Shanghai property project last week announced a nearly 30 percent discount on homes in the face of disappointing sales. The price cut comes as the latest sign of weakness in a real estate market which many locals have long believed can only go up.
The Yulong Palace project in the city’s Pudong district is now selling homes for RMB 36,000 ($5,751) per square metre, according to a local news report citing a sales officer for the developer, Gold Tai Yuen Group.
The development, which is still under construction, has 113 apartments ranging from 220 to 300 square metres, but only seven have been sold since the development went on the market in October last year. Data from the Shanghai Real Estate Trading Center indicate that the earlier sales averaged RMB 50,000 per square metre.
Shanghai, which serves as China’s commercial capital, has long had one of the country’s strongest housing markets and stories of discounts by developers are rare.
Housing Prices Said to Decline Nationwide in April
The headwinds facing the Shanghai developer are becoming more of a nationwide phenomena, as some recent housing market figures indicate.
A report last week by CRIC, the information unit of E-House, found that average home prices in its survey of 288 Chinese cities declined 0.02 percent in April compared to March. The drop in prices was the first since 2012.
Average prices in Shanghai still rose during April, although at a slower rate than in previous months. The volume of transactions in Shanghai has also slid recently with the city’s Provident Fund Management Center announcing last Monday that new mortgages issued in the first quarter of 2014 amounted to RMB 12.45 billion (US$2 billion), down 15.1 percent compared to the same period in 2013.
Guangzhou and Beijing Begin Discounting Too
The country’s other first-tier cities have also shown themselves susceptible to housing discounts and falling prices in this year’s market.
Surveys by real estate consultancy E-House and property information provider CRIC both showed Shenzhen in Guangdong province suffered a month-on-month decline in housing prices in April.
In Guangzhou, the capital of Guangdong, developers have reportedly been offering discounts of 20 percent on homes in the city’s suburban districts, while even the country’s largest developer by sales, China Vanke, has resorted to price cuts for a project in Beijing.
The willingness by developers to bring down prices in the first-tier cities follows months of reports of reduced pricing in smaller cities such as Hangzhou and Changzhou.