Mainland Property Prices Drop Dramatically
Along with the arrival of property price cuts in the second and third-tier cities,the same plight has spilled over in to the first-tier cities,top property developers and state-owned enterprises.The property price is largely lowering. Even in Shenzhen City,a place called property investment haven ,the lowest price of new properties, has reduced by 3000 Yuan(US$ 500) per square meter compared to last year.Financial institutions also followed suit and began to reduce their property financing.So why does the prematurely predicted bubble break so late? Let 's see what the experts are saying.
According to the available public information, till March 27 of this year,
more than 75 state-owned property development companies have attempted to sell stock shares or assets.Their total market value was around 10 billion RMB.
(US$ 1.6 billion)
In the first-tier cities like Beijing and Shanghai,since last September, the second-hand property prices have been continually dropping downwards.
While new properties anywhere elseare sold on the market at a flat price.
Following the flat prices of new properties in Guangzhou and Beijing,the new property price in Shenzhen City, called property investment haven, began to decrease.The lowest price of new property Shuimudanhua just on the market in March,has diminished by 3000 yuan per square meter comparing it with the lowest prices of last year.
Securities Daily reported, in March the national land market abruptly came to a halt. Up till March 25, the revenues of selling land in first-tire cities, is just 8.45 billion RMB,whereas compared to the same period of last year,
it was 32 billion RMB.Meanwhile, the land grab of most benchmark property enterprises, also shows signs of slowing down.In the first season of this year, the top ten property companies obtained land with a total value of 77.6 billion RMB (US$ 12 billion),which is around 20% of the 388.5 billion RMB ( US$ 62 billion) in the same period of last year.
Guangdong-based Southern Weekly newspaper points out,some property companies in second- and third-tier cities,are trying to rapidly retreat from the property market, because they are finding many minefields along the way.
Shou Bonian of Greentown Real Estate Group Company Ltd CEO,gave a warning recently, this year will see some small companies losing money if they are to survive this rocky period.
In addition to this, in view of the conspicuous high risk within the property market, financial institutions also began to control the financing supply
to the property market.Early this year, Industrial Bank headquarters has required all branch offices,to stop the property mezzanine finance business and Real estate, supplying chain finance business.Media describes the Industrial Bank, as the first bird to fleefrom its nest,as the net closes in and the property market moves closer to its own doomsday.
Beijing CCTV financial commentator Mr Niu Dao:"Since last year, almost no buyers dare to buy in to the property market, hence the property price slump we are now experiencing has dawned.The current issue, is that China 's property has had a massive turn around. When RMB goes up, it is expected that the property prices
will increase and then many people will rush into the property market.Yet when RMB goes down, many people retreat from the property market, and hence the price then goes down."
Deputy Director Mr Feng Xingyuan of Beijing-based Unirule Economic Inistitute:
"This might relate to the situation of economics to some extent.The property developers have sustained it for many years.Most of the property development companies have high debt rates.Considering the high interest rates of the private lending market,if some loans are used for property investment, then this shows the severity of the situation to the funding property market,and some of the property developers are so close to their limit of funds."
Of the 142 public listed property companies in A Share Market,according to the published annual reports of 55 companies,their overall asset-liability ratios are continually going up.Of these 55 companies, 29 companies have negative values in the area of operating net cash flow. Four companies, including RiseSun Real Estate Development Company Ltd., Beijing Urban Construction Investment & Development Company Ltd, Cinda Real Estate Company Ltd, and Great- town Holdings Ltd, all have negative net cash flow of more than 3 billion RMB.Number one property company Vanke Company, also has a dramatically reduced net cash flow,
on average 146 percent less than last year 's cash flow,which is the lowest on record for the past five years.Large-scale property developers, including Financial Street Holdings Company Ltd,Beijing Urban Construction Investment
& Development Company Ltd,and Citychamp Dartong Company Ltd, have also reduced
their net cash flow of over 100% compared to last year.
Two years ago, many domestic and international economic experts, began describing how China 's property market bubble would soon burst.However, during the recent two years, the property price was still climbing.So how has the bubble managed to remain so robust and only just started to give signs of bursting?
Mr Niu Dao: "China is a dictatorship country.When the property field experiences serious problems,the Central Bank and the Government will mobilise all means to secure the property price.They don 't follow the market law. Each time when the property market is prepared to make an adjustment,the government then goes and increases the monetary supply and loans.People know the government secretly protects the bubble,so they all rush into the centre of the bubble.Now however, the government can not secure the bubble.US Dollars are also fleeing the country and this triggers the impossibility of securing the bubble."
Beijing Vantone Real Estate Company Ltd is one of the premium property developers in China.As for high property prices, the Board of Directors to Vantone Mr Feng Lun stood out for his complaining.He says, the CCP Authorities have lifted the land prices up to very high levels for a long time now.The government is pushing from behind all property market companies, so isn 't the property price going to be too high?
Interview & Edit/LiuHui Post-Production/LiYong