Realtors get inventive to beef up sales amid property slowdown

A potential house buyer at a real estate promotion event in Beijing. The Chinese property market is expected to face pressure next year due to the economic slowdown. [Photo / Provided to China Daily]

China's real estate market is due to come under pressure next year because of the slowdown in economic growth, with property developers strengthening their marketing campaigns to stimulate sales.

The total contracted sales of the residential property market are expected to decline by 5 to 10 percent this year compared to 2013, largely due to the drop in sales volume, according to a report by Moody's Investors Service.

"China's weak residential property sales year-to-date were largely driven by lower transaction volumes. We expect price pressure to increase over the next few months," said Franco Leung, vice-president and senior analyst at Moody's. "Many of the 70 major cities are expected to report month-on-month price declines over the next few months."

Of the government's 70 sample cities, 69 saw a price drop in September compared with the previous month, while the remaining one saw prices flatline, according to the National Bureau of Statistics.

A senior executive with a Hong Kong-listed developer who declined to be named is not optimistic about the prospects for next year, saying that the expected slowdown in China's economy will inevitably hit the property sector, even with the government's recent policies to stimulate demand.

JP Morgan lowered its 2015 forecast for China's GDP growth to 7.2 percent, down from the previous 7.3 percent, according to a report issued on Nov 9. UBS's forecast is more pessimistic, with 6.8 percent predicted for 2015 and 6.5 percent for 2016.

The 5 to 10 percent year-onyear fall in the contracted sales of 2014, however, is less than the 10.9 percent decline in the first eight months of this year compared to last year, primarily driven by the expected quarter-on-quarter growth in the fourth quarter this year, the Moody's report said.

Factors driving up growth in the last three months include improving mortgage availability, shortening mortgage approval and disbursement periods, more new projects launched by developers, and the continued relaxation of home purchase restrictions by local governments.

The new policy on mortgages released at the end of September is believed to be the most effective measure in warming up the property market, industry experts say.

The easing of rules allows mortgages on second homes to be treated in the same way as a first mortgage, as long as the buyer has paid off the first loan. Other stimulus measures include the relaxation of terms in withdrawing housing provident funds to pay rent and bolstering the building of subsidized housing.

Kou Hailong, general manager for Beijing with real estate agency Century 21, says there was an evident rise in sales during the last two weeks of October. "Between Oct 20 and 31, a total of 6,095 contracts were signed in the pre-owned housing sector, increasing 51.1 percent month-on-month," says Kou.

"The figures of the deals in October showed that the stimulating effect of the favorable policy on mortgages is being felt, and it is expected that transactions in November will keep going up as a result of a couple of favorable policies being executed, probably reaching a record high this year."

The transaction volume in 42 major cities reached 24.16 million square meters in October, climbing 12.6 percent monthon-month and setting a record this year so far, according to China Real Estate Index System－the country's largest real estate website.

First-tier cities all saw an increase in transaction volume, and among them, Guangzhou in Guangdong province posted the biggest month-on-month increase with 58 percent growth, followed by Shenzhen, also in Guangdong, which reported 47 percent growth.

Among the 25 second-tier cities surveyed by CREIS, 17 witnessed a surge in October compared with the previous month, with Nanjing in Jiangsu province and Hangzhou in Zhejiang province registering significant growth.

"The easing of the mortgage rules has relieved the burden of many homebuyers seeking to improve the housing condition," says Gu Yunchang, deputy head of the China Real Estate and Housing Research Association.

Despite the recent rebound in sales, most listed property developers still find it difficult to meet the sales targets set at the beginning of the year.

The sales of 21 listed property developers reached 784.6 billion yuan ($128 billion) in the first 10 months of this year, up 11.3 percent year-on-year. However, compared with their sales targets of 2014, they have achieved an average of 74 percent so far.

"The sales of listed developers have been improving since the easing of mortgage policies, but they still face a huge de-stocking pressure. Therefore, they will strengthen their efforts to stimulate sales to meet their sales target this year," says Zhang Dawei, chief analyst at property agent Centaline's Beijing branch.

Sino-Ocean Land, a Hong Kong-listed property developer, teamed up with Chinese e-commerce giant JD.com to launch a large-scale sales campaign on Nov 11, now a shopping-spree day for Chinese netizens. It was the first cooperation between a property developer and an e-commerce company.

A total of 11 apartment units developed by Sino-Ocean Land in Beijing, Tianjin, Wuhan and Hangzhou were on sale through JD.com, allowing the lucky buyers to purchase with a discount of 90 percent. More cooperation with JD.com is in the pipeline, according to Sino-Ocean Land.

Franshion Properties, another Hong Kong-listed property developer, also launched a large-scale online sales campaign on Nov 11. It sold out 4.27 billion yuan of apartments on Nov 11, 38 percent of its total sales in the previous 10 months.