According to research from international property consultant Knight Frank, in the second quarter of 2011, credit-tightening policies by the Mainland Chinese government resulted in further restrictions in financing for developers, an increase in burden for homebuyers and a strengthening of the wait-and-see atmosphere in the market. As a result, home sales in major Chinese cities dropped quarter on quarter and, in some cities, developers even lowered prices to promote sales. However, as the financial strength of developers has not deteriorated markedly, price-cuts were limited to specific developments and overall, prices remained firm.
Mr Thomas Lam, Head of Research at Knight Frank in Greater China, says “the number of home sales remained low in Beijing and Guangzhou in the second quarter as purchase restrictions suppressed housing demand from both investors and upgraders. Sales in Shanghai, however, jumped 37.8% compared with the previous quarter due to increased supply and price cuts in certain projects.”
In the luxury market, price increases were witnessed in Beijing, Shanghai and Guangzhou in the second quarter. Mr Lam believes the increases were due to the high quality of the luxury projects and the strong purchasing power of interested buyers. Sales volumes, however, dropped in both Beijing and Guangzhou due to lower supply levels and ongoing property regulatory policies.
He concludes by saying, “new-home supply will continue to rise and we expect sales to rebound in the third quarter. However, price growth will slow in the second half of 2011, as the government is unlikely to relax cooling measures. Also, inventory could rise and developers will face increased funding pressure.”