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People's Daily Online>>China Business

Property firms offering price cuts come under spotlight

By Cao Qian (Shanghai Daily)

09:36, November 18, 2011

Real estate developers which attracted newspaper headlines when they acquired land parcels at record prices in an earlier industry frenzy have found themselves in the spotlight again by offering price cuts.

The land parcels bought with record prices during previous years have become a really big burden and headache for the firms which are suffering tighter credit and cash flow due to sluggish home sales over the past nine months, said Johnny Sze, managing director at Shanghai Hanyu Property Consulting Co.

Between January and October, sales of new homes, excluding affordable housing, totaled only 6.22 million square meters in Shanghai, the lowest since 2006, according to Shanghai Deovolente Realty Co data.

A Changzhou, Jiangsu Province-based developer paid the highest average gross floor area price of 13,200 yuan (US$2,078) per square meter for a parcel in Nanxiang, Jiading District in late 2009. The firm slashed the selling price from the previous high of 25,000 yuan per square meter to as low as 18,000 yuan per square meter, but at a loss.

"The developer may only be able to make profit if the apartments are sold for above 24,000 yuan per square meter, so the loss is pretty big," said Sky Xue, an analyst with China Real Estate Information Corporation. "However, the company has certainly no other choice if it wishes to unload its stock in order to replenish its capital."

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