So far, however, many consumers are not impressed.
Liao Xiaoyong and Liu Yanxi, a newly married couple in Beijing, have postponed looking for an apartment, hoping the prices will drop further. In the meantime, they have hired a carpenter to make their furniture, hoping this will save them money in the long run. "Since I met my wife three years ago, prices have gone up way beyond our ability to pay," said Liao. "At this point, I think it’s better to wait. I don’t see prices rising again any time soon."
Analysts expect overall demand to drop this year, as buyers like Liao and Liu wait out the market. Morgan Stanley has forecast a drop in the share prices of such leading developers as Aoyuan (26 percent), Hanglung (45 percent) and Country Garden (60 percent).
Still developers can only go so far to woo buyers, as their operating capital dwindles.
"Most of them will not admit it, but half of the developers out there do not have enough capital right now," said Jerry Lou, an equity stategist at Morgan Stanley.
In recent years, many of the heavyweights in China’s real estate industry went public, hoping to raise foreign capital. When the global economic crisis hit, this strategy backfired in many cases.
Housing giants like R&F, Country Garden, Shimao, and Greentown are now listed on the Hongkong exchange. Last year, however, the price of their shares all plunged by more than 80 percent.
The health of the housing market is a source of national concern.
"The situation now is that developers and local governments are unwilling to let housing prices go down substantially. But unless they sell more homes, it will start to affect suppliers of everything from steel to furniture to appliances," said Lou.
Housing is also a key source of new jobs. The number of construction workers has been growing at an annual rate of 6.6 percent, and hit 2 million last year. Overall investment in housing reached $447 billion in 2008.
Although housing is not one of the 10 key industries targeted for revitalization by the government, it has been a hot topic at the annual sessions of the NPC and the Chinese Peoples Political Consultative Conference (CPPCC) in the past two weeks.
Xu Jiayin, the chairman of Evergrande Real Estate Group and also a member of the national committee of the CPPCC, recently called on the central government to control land costs, taxes, and profits of real estate companies in order to cut housing costs.
Xu also suggested lowering or abolishing the 100 or more different taxes paid by the real estate industry.
The government has already cut interest rates five times, eliminated several taxes, and provided a 30 percent discount on some mortgages.
After several years of explosive growth, there is no doubt that China’s real estate market is in for a correction. Vanke, which had predicted that the market would hit bottom this year, now says it expects things to get better in 2012. Other analysts suggest that a recovery may take as long as five years. |
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