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Housing Prices
According to the National Bureau of Statistics, the average housing prices of China's 70 major cities dropped 0.9 percent in January the steepest annual decline since data collection began in 2005. The National Development and Reform commission reports prices of newly built residential properties fell 1.4% last month from a year earlier, compared with a 0.8% fall in December.
A: Is there a certain area within the city that is looking the most attractive price wise?
S: It really does depend on, not just depend on the area, but it also depends on the project as well, you’ve got to look at the development case by case, in terms of the quality, the build quality etc., certainly in the primary market. In terms of areas, downtown Shanghai is always going to be there or thereabouts a good investment, if you are looking at it from a long-term perspective. Right now, we’ve seen for some projects, a year ago or so, they might have fetched maybe 80,000 RMB per square meter. This is a very high end, but now some of the units in those projects have drop-back prices down to maybe 55,000 RMB per square meter.
A: Would this then be a good time if someone was looking to go bigger? Invest in a bigger place, because they are going to afford a little bit more per square meter?
S: Again, if they got the cash, and if they feel that they are in a secure position job-wise etc. then they would have the confidence, so right now, that it’s a good opportunity to upsize in your purchasing.
A: You have said previously that the market is not bottomed-out yet, how much lower do you think it can go? And how much longer till that bottom hits?
S: In terms of bottoming out, we are looking at end of 2009, currently we are looking at, in Shanghai, average mass residential prices being around 12,000 RMB per square meter, for high end residential, from our data, we’re looking at around 34,000 RMB per square meter. As I mentioned before, certainly in the primary market, if transaction volumes don’t pickup, and they continue to decline, then we’ll see developers offering greater discounts from 10% to 20% and possibly to 30%.
A: Let’s talk a little bit more. We talked about high end, the high-end market. What about mid-to-low end? Are we seeing the same benefits possibly out there for people who want to invest?
S: In terms of low end, if say a developer is finding it quite difficult to keep up the sales turnover for low end. We’ve seen quite recently some governments around China, provincial governments, actually buy up on bloc some properties, and try to convert them into affordable housing. So that’s something actually open to developers that could well be an option for developers. If you are looking at say, lower end, that would be sort of sub 12000 RMB per square meter, again, there’s probably less room for a developer to maneuver in terms of discount, the type of discounts, the amount of discounts, the amount of incentives, on offer for buyer developer for that type of property could well be a little bit lower than say a higher end property.
A: This could be a good time for people to invest, as the prices keep getting lower. The question is, then what do you look for, do you look for new, do you look for second hand, what’s the best type of investment to look into?
S: The market has certainly turned into a buyers’market. In terms of primary property, first hand property, there are bargains available. Developers pushing out discount, pushing out incentives, it’s a brighter market for buyers who have cash readily available. In terms of the secondary market, again, there’re opportunities available, I feel that, in terms of secondary market, a buyer needs to do just that much more due diligence. In order to get a good bargain, he needs to look at the owner. For example, the owner might have several properties around Shanghai, for example, and might be suffering in terms of the downturn in the market, and might want to off load several of his or her units, and if a buyer is interest in the second hand market can find someone in that position, then that buyer might be able to get quite a good deal on a fast sale.
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