Still not the worst time
Without a doubt, a major collapse in housing prices would be an unmitigated economic and political disaster. Thus, developers are probably hoping that growing concerns over the possible explosion of China's property bubble may shake the central government's resolve to keep a tight rein on liquidity.
In the past nine months, it was reported that only 16% of the money that ensured the operation of property companies and real estate agencies came from the banks, the number of which was a historic low.
Since May, the total sales volume in the four major cities, Beijing, Shanghai, Guangzhou, and Shenzhen, was only half that of the same period last year. In September, half of Beijing's housing projects had a zero-sales record, which put the developers' capital chain in peril and forced them to reduce prices to relieve the pressure.
However, according to Song Weiping, general manager and co-founder of the Greentown China Holdings Limited, a leading real estate company, this is not the worst time yet. Song said he almost sold his project at the hardest time in 2008, but the current situation is not that terrible, and he holds an optimistic opinion of the property market in the long term.
Though the property curbs have lasted for 18 months, the shaking of housing prices has only been presented in the form of structural adjustment. Price cuts are still concentrated in suburbs and areas of lower-end housing projects.
Turning point looms
The price cut trend may not be able to set the whole prairie ablaze, but the downtrend is likely to get clearer soon.
According to statistics from the Beijing Real Estate Trading Management website, the city added 16,196 new housing units from September 1 to October 25, only 10% of which were sold.
As of October 24, Beijing still has 117,500 new housing units waiting to be sold. Even without additional units, it will take at least 20 months to "digest" them, according to the website.
Under such a condition, property developers must continue with their strategy adjustment and take further action to get their cash back quickly. Therefore, a larger scale price-cutting promotion will probably be seen.
Zhong Wei, professor at the Beijing Normal University, pointed out that the situation will be much tougher for these developers in the future. Once the buyers feel the adjustment after a second round of price drops by the first half of next year, developers will face more difficulties at that time.
However, Ren Zhiqiang, chairman of Beijing's Hua Yuan Real Estate Group and member of the Beijing Municipal Committee of the Chinese People's Political Consultative Conference, held a different opinion. He said the housing prices can expect a retaliatory rise in 2013.
Recently, China's Premier Wen Jiabao reiterated that the government will firmly maintain restrictions on real estate and local authorities should continue to strictly implement its policies, according to a statement following a State Council meeting.
