A market that's not such a hot property

A recent decline in housing prices is being exacerbated by tightened credit conditions and a surge in the supply of subsidized State housing, as He Na reports.

Chen Xin, who works for an academic institute in Beijing, said he is experiencing the hardest time of his life because the "perfect" house exchange he has spent a long time planning has been ruined by the recent slump in the price of residential property.

Chen planned to sell his house in Lishuiqiao, in Beijing's Chaoyang district, and buy a smaller one in Haidian, closer to his son's school. The new house is 20 square meters smaller than Chen's current home, but costs about 1 million yuan ($160,000) more. Chen planned to sell his house and use the money to pay the lion's share of the cost of his new home while using a bank loan to cover the shortfall.

Chen paid a deposit of 200,000 yuan in early March and signed a contract to pay off the remainder within two months. However, just as he and his wife were busy planning how to decorate their new home, property prices began to decline. Their house has now been on the market for more than three months, and they have lowered the asking price three times, from 3.2 million yuan to 3 million, but to no avail.

The owner of the house Chen intends to buy has agreed to extend the payment deadline by two months, but no longer. If Chen fails to make up the outstanding sum by August, the sale will fall through and he will forfeit half of his deposit as a default.

"The dilemma has almost driven me crazy - 100,000 yuan is more than half my annual income, but I can't do anything to reverse the current market downturn," said the 41-year-old.

In desperation he called on friends and relatives for help, but they all told him that the rocky state of the market has prompted people to postpone their purchase plans.

One of the people saving their money is Zhu Hangtian, 30, who works for the Chinese Academy of Sciences in Beijing. He said his parents had planned to buy a house for him as a family investment and in anticipation of his eventual marriage. As a result, Zhu has paid close attention to property-related government policies, news reports and also second-hand house posters.

"The more I learn, the more I believe that it's not very wise to invest in property right now. I may plow the money into other investment options instead," he said.

Changing times

According to Li Wenlong, a property consultant at Beijing Homelink Real Estate Services, a well-known realtor, the predicaments faced by Chen and Zhu are not unusual. Li has worked for Homelink's office in Beiyuan district for more than 18 months, which makes him a relative veteran.

"Before Chinese New Year, a one-bedroom apartment of 58 to 60 square meters in the Meilifang area sold for 2.1 million yuan, but now the same apartment will only fetch 1.8 million," he said.

"I remember that this time last year, we had lots of interested customers and they seemed to arrive at the office one after another. It was totally a seller's market, so prices were non-negotiable, and even though I had only just graduated I could still make commission of 20,000 yuan a month," he said.

Times have changed, though, and bowing to the inevitable, sellers have lowered their prices. However, buyers are still few and far between. When Li calls potential customers, most say they are in no hurry to buy and are happy to wait, some become impatient with his offers and a few have simply muttered an excuse and hung up.

"I haven't sold a single house since March, and I can only make about 2,000 yuan a month. At the lowest point, I made just 1,600 yuan, which didn't even cover my rent and food bills," he said.

The knock-on effect has been that several of Li's colleagues have quit their jobs, mostly those who had only worked for the company for a few months.

"Property consultancy is a job with a low entry threshold, but I like it. And also I love working with the team because there's a sense of family. I will persist as long as I can," said the 24-year-old from Xiangfan in Hubei province.

Other realtors tell a similar story. On a Saturday - the best day of the week for showing clients around available properties - three agents of the Beijing-based agency Bacic &5i5j in Chaoyang, sat in front of their office and chatted in the sunshine. Two other agents played games on their phones.

The agents hopefully held out flyers to passers-by, but very few people bothered to take them.

Although property agents work on commission and the dearth of sales in recent months has seen incomes shrink, experts said it's too early to contemplate large-scale closures.

China Daily spoke with several long-standing property agents, some of whom survived the two gloomiest periods in recent real estate history - in 2008 and 2011. They all acknowledged that times are tough, but remained upbeat about the prospects for the industry.

According to Chu Meiting, who owns a real estate agency in Changchun, the capital of Jilin province, local prices have remained stable since the start of the year, but, influenced by reports of the decline in property prices in other regions, many potential buyers have elected to sit on their hands and bide their time.

"We employed 16 consultants in March, but six have now left. It's natural that people will leave when the market is bleak. I have been working in this field for more than a decade, and I am used to the fluctuations," the 41-year-old said.

"I don't know about other places, but in Changchun all the real estate agents work on commission, so their only income comes from selling property, which means I don't need to pay them if they don't sell any houses or apartments. I own my outlet, and the maintenance costs are low, so no matter how bleak the market becomes, I won't close," she said.

"In Changchun, where land is limited and demand is stable, house prices won't fall too far, and they even may rise, although very slowly. But for houses in the suburbs of tier-three or four cities, it's very hard to estimate prices," she added.

Liu Wanjin, 39, who works for an insurance company in Changchun, had planned to buy a house close to the middle school his daughter will attend starting in September.

"Our home is too far from the school. If we buy a house closer to the school, we'll save a lot of travel time, but houses in school districts are really expensive," Liu said after visiting several available properties.

"My relatives have persuaded me to rent a house near the school for several months because they read reports that house prices are falling every day," he said.

Market malaise

Statistics from the Beijing Municipal Commission of Housing and Urban-Rural Development show that the number of second-hand house transactions in April was 7,616, a decline of 14.8 percent from March.

Not only is the second-hand house market in a gloomy state, the prospects for newly built homes are also looking bleak.

Of the 70 major cities surveyed by the National Bureau of Statistics, eight reported a month-on-month decline in new-home prices in April.

A survey released by the China Index Academy shows that the average price of new homes in 100 major cities declined by 0.32 percent in May from April, to 10,978 yuan per square meter, the first drop since June 2012. Prices fell in 62 cities and were unchanged in one. The biggest monthly fall was in Shantou, Guangdong province, where prices fell by 3.64 percent in May compared with April. Meanwhile, a poll conducted by the real estate services provider E-House China Holdings Ltd showed that the prices of new homes in 288 cities fell 0.03 percent in May from April, marking the second successive month-on-month decline.

Sluggish home sales, rising supply and declining prices epitomize China's cooling real estate market, and there are concerns that the decline may be exacerbated by commercial banks' growing reluctance to provide loans for mortgages.

According to a report by Bank of America Merrill Lynch Global Research, a further real estate slowdown is inevitable, and will result in a growing number of small developers encountering financial troubles.

Zhang Xu, an analyst with Homelink's market research department, said that traditionally March and April are the recovery periods for the property market. However, this year, the volume of second-hand house sales failed to rise in April, and fell by 10 percent year-on-year.

"The main reason that a large number of people have adopted a 'wait-and-see' attitude lies in tight credit conditions and a surge in the supply of subsidized housing," Zhang said.

According to the official micro blog of the People's Bank of China, the central bank held a meeting with the directors of 16 commercial banks on May 12, and urged them to accelerate the approval and issuance of loans to eligible homebuyers, mainly those buying their first home. However, the response to the central bank's call has been inconsistent from city to city.

Hu Jinghui, vice-president of Bacic &5i5j, told Xinhua News Agency that an increase in the supply of government-subsidized housing for those on low incomes has soaked up some of the demand and dented the market.

Meanwhile, in a research note, Zhu Zhongyi, vice-president of the China Real Estate Industry Association, wrote that the slowdown in lending for mortgages and property development has exacerbated the general deceleration of the real estate market.

Sales of residential properties slumped 7.7 percent during the first quarter of the year to 1.1 trillion yuan, and prices have been falling month on month in most of the 70 major cities surveyed by the National Bureau of Statistics.

While many experts expect the trend to continue, Chen Zhi, deputy secretary-general of the Beijing Real Estate Association, said the market should recover to "a normal condition" in July.

"The main engine of home purchases in the major cities is not wealthy people, but young people in their '30s. They would rather shoulder a heavy loan than return to their hometowns. The high prices in major cities are a result of China's unbalanced industrial structure, which results in huge numbers of people moving to the major urban centers. Without a reasonable adjustment to that, the price fluctuations will continue," he said.