Peak season, weak sales

By Zheng Yangpeng (China Daily) Updated: 2012-10-04 07:57

'The battle to come'

As the media shines its spotlight on a possible boom in turnover, developers are quietly eyeing the battle behind "Golden September, Silver October".

Major developers are accelerating purchases of land parcels, as their inventories fade and the price of land remains relatively low.

From Sept 5 to 7, seven major real estate developers bought land parcels worth 8.44 billion yuan ($1.34 billion) in first- and second-tier cities, according to industry data.

China Vanke Co, the country's biggest property developer in terms of market value, paid 4.67 billion yuan for two parcels of land in Guangzhou and Hefei on Sept 5 and 6.

Moreover, the floor space of newly constructed homes is increasing and property investment is rebounding.

From January to August, the area of newly constructed homes fell by 6.8 percent, compared with a year earlier. That's much lower than the 26.7 percent decline in the first seven months, according to the National Bureau of Statistics.

That suggests a strong rebound in August, but it's difficult to assess because the NBS does not release figrues for individual months.

From January to August, property investment increased by 15.6 percent, according to the NBS, 0.2 percentage points higher than the combined figure from January to July.

Developers increasing their reverses of land, a larger area under construction and rising investment indicate growing confidence within the property industry, according to analysts.

"Although the central government vowed to put strict house policies firmly in place, the last round of increases in prices and turnover (late May to July) did not trigger tougher policies. In some ways, the policy is actually relaxed, as lower interest rates improve access to mortgage credit," said He.

This, along with improved liquidity for developers, has boosted confidence and developers will continue to add to their land reserves.

To spur a slowing economy, the People's Bank of China cut interest rates in June and again in early July. Market sentiment changed quickly and house sales and prices rose.

However, a widely anticipated third cut in rates - which would further reduce the cost of borrowing - did not materialize in August.

But an increasing number of potential homebuyers are convinced that rates will be lowered again this year. That expectation has seen many hold off on their plans to buy.

On the supply side, He of the China Index Academy forecast that developers will maintain the current pace of new project releases in the "post-Golden Season" because they are driven by a desire for handsome results as year-end approaches.

The increase in supply and demand will help sales to keep rising through November and December, while prices will rise moderately, said He.

"Actually, the traditional busy and off seasons no longer fit today's reality. Property-related policies wield a much larger influence," said Gu Yunchang, deputy head of the China Real Estate and Housing Research Association.

"Consumers will buy homes at any time if they think the price is reasonable, but they won't if it isn't, even during a busy season," said Gu.