Buy the flat and we'll throw in the job to pay for it

Published 04th Feb 2009

Estate agents in China are using desperate measures to try to shift property in big cities hit worst by the slump


For young homebuyers facing the downturn, the offer from the Shanghai Sanxiang Co was unmissable. Buy a flat – and we'll give you a job to go with it.

The developers, who have so far hired eight buyers, say the deal demonstrates their sense of social responsibility. Others think it says as much about the fear gripping the market as house prices in China tumble after soaring growth. Other Shanghai companies are slashing as much as 30% from the price of flats.

British estate agents might wonder what the fuss is about. China's urban house prices fell 0.4% in December; the first year-on-year decline since records were first published in 2005, but hardly disastrous in the global context.

Yet the headline rate disguises huge disparities within the market; while some cities in the centre and west of China are still enjoying growth, the "first-tier" cities such as Shanghai and Beijing have already been hit. Official estimates this week suggest that 20 million migrant workers have returned to the Chinese countryside from the big cities because of the economic downturn, reducing the demand for accommodation.

The worst market of all is the export-led Pearl river delta; last month Shenzhen prices saw a drop of almost 18% year-on-year – and experts warn that things are going to get much worse.

'Sellers were not willing to come to the realisation that the market was changing, so they haven't dropped their prices significantly yet – but that's what we are starting to see in '09 and I think we will see further drops. "I'm sure it's going to be a difficult time for China over the next year, and therefore for the property market' James MacDonald

The effects are beginning to be felt far beyond the glossy offices of developers: on empty building sites, in quiet factories, and in distant rural villages where families depend on the wages of migrant labourers. Tens of millions work in construction. Fewer house sales mean less demand for builders, materials, appliances and furniture – and a smaller chance of the government hitting its 8% growth target this year.

According to Macquarie Securities, commercial, industrial and residential construction rose by more than 32% in 2007 and another 9% between January and September last year. But in October it fell by more than 16%. This year it will shrink another 30%, the firm predicted.

Ma Jun, Deutsche Bank's chief economist for China, has warned that falling property prices would contribute to the worst deflation in a decade.

Experts believe steep falls are inevitable because transaction volumes have plummeted, with a year-on-year drop in sales of about 20% for the first 11 months of last year. A report from the UK property consultancy DTZ Holdings this week said that unsold residential property in nine of China's biggest cities now totalled 38m square metres.

Source: ' Guardian '

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