According to the latest report jointly released by Knight Frank and Holdways, in the third quarter of 2011, total primary residential transacted areas in 20 major Mainland cities fell by 17.3% year on year and 1.6% quarter on quarter. Since potential buyers adopted a wait-and-see attitude amid tightening policies with restrictions on home purchase and bank loans, sales in the third quarter, despite its being a traditional high season, were unsatisfactory. The transacted areas of new homes in Beijing (-18.3%), Shanghai (-21.8%), Guangzhou (-15.7%) and Shenzhen (-18.7%) exhibited significant year on year drops. Among other cities, ten of them showed more than 10% decreases in transacted areas. Chongqing and Hangzhou have dropped more than 50%. Due to decreased sales, inventory levels increased substantially by 28.8% year on year.
Price growth was suppressed in such a quiet home sales market. New home prices, adjusted by differences in property type, location, fittings and whether they were presale or completed units, edged up 1.1% quarter on quarter. In the third quarter of 2011, all 20 major cities witnessed year-on-year growth in adjusted city-wide new-home prices, with Ningbo (35.8%) recording the largest increase, followed by Fuzhou (28.1%) and Shenyang (26.7%).
Mr Thomas Lam Ho Man, Head of Research at Knight Frank in Greater China, says “considering the policy risks and market situation, in the fourth quarter, we believe the funding pressure would force more developers to reduce prices of their developments to retrieve cash and avoid insufficient cash flow or a break in capital chains. Meanwhile, since the growth of home prices has started to become controllable, we believe that the government is unlikely to launch further new tightening policies, though current policies are not expected to be relaxed in 2012. We expect property prices would only slightly adjust next year, while local governments could fine-tune their policies based on the cities’ individual situations.”