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People's Daily Online>>China Business

New urban home prices slide in March (2)

By Hu Yuanyuan (China Daily)

13:26, April 19, 2012

Expectations for further declines in prices are also discouraging some prospective buyers.

Xiao Wei, a 30-year-old company executive, had planned to buy a home outside the capital's eastern Fifth Ring Road. However, after prices at the project were cut 10 percent in March, he changed his mind.

"Maybe the price could fall even further in the coming months, so I'll postpone my purchase plan," Xiao said.

Meanwhile, as tightening measures persist, more small developers may go bankrupt, and there will be more mergers and acquisitions, creating more investment opportunities for domestic and foreign institutions, analysts said.

According to Fitch Ratings Ltd, the recent bankruptcy filing by Hangzhou Glory Real Estate Co, a comparatively small homebuilder that focused on the high-end market in Hangzhou, shows how regulations continue to polarize the Chinese property market between large and small players.

Lower property prices and sales volumes are hurting profit margins and cash flow.

"This means that the homebuilding sector remains highly challenging for the smaller local and regional operators such as Hangzhou Glory, which have neither the scale nor liquidity to ride out the slowdown," Fitch said in a recent research note.

Wang Qiong, head of research at Savills (Beijing), a UK-based real estate consultancy, said a number of international real estate funds are contacting Savills about investment opportunities in China.

"It seems that the better-than-expected performance of the US economy has made the fundraising situation for real estate funds easier," Wang said.

For Jack Ye, national director of investment and capital markets of Cushman & Wakefield China, controls on housing are making office and retail properties appealing for investment.

"We expect to see more offshore funds investing in real estate projects, and also an increase in land transactions in second- and third-tier cities," said Ye.

"Offices in Beijing and Shanghai remain a hot spot for investment, while retail markets in first- and key second-tier cities are also a focus for institutional investors," he added.

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