26 March 2019
Hangzhou, once the barometer of China's home market, is now stuck in a crippling slump due to a big backlog. Photo: peterrioIve from flickr
Hangzhou, once the barometer of China's home market, is now stuck in a crippling slump due to a big backlog. Photo: peterrioIve from flickr

The mad, bad scramble for Hangzhou homebuyers

The gloves are really off.

Sales staff at two Hangzhou property developers with projects near each other reportedly came to blows and inflicted severe injuries in the melee.

Jingrui Real Estate staff said salespeople from Shimao Property Holdings (00813.HK) verbally and physically abused them, while a Shimao regional manager countered that Jingrui employees were making a nuisance at Shimao’s sales center and intimidating prospective buyers.

It’s not the only incident of its kind in Hangzhou, the Zhejiang city that was once at the forefront of the nation’s regional home markets but is now in the depths of a crippling slump.

Price cuts have spread like an infection since two medium-sized developers slashed home prices in early February. Residential projects in the city’s newer districts are taking it hardest.

Just a week ago, realty titan Vanke (200002.CN, 000002.CN) began to offer a very generous discount of up to 400,000 yuan (US$64,224) at one of its flagship developments in Hangzhou’s Qianjiang New Town, the city’s new central business district, the Economic Observer reports. With that kind of offer, a fitted-out home there now sells just 3 million yuan in total.

Vanke Hangzhou refused to call the move a price cut, describing it instead as an adjustment in design and construction from luxurious lodge-style homes to flats with an impressive price-performance ratio. Local media say thousands of buyers showed interest in the following days and competitors with projects in the district were caught off-guard.

But other Vanke projects in the city have also taken a battering. Its riverside townhouse development in the city’s south lost many buyers — some of whom had already signed pre-purchase contracts — when Shimao cut the unit price of its nearby homes to 19,188 yuan per square meter (sqm), 5,000 yuan below Vanke’s promotional offer. And Greentown (03900.HK) homes there are reportedly selling for 1.35 million yuan a pop.

Either for destocking or recouping investment, analysts say developers, big and small, have some common motives for further price cuts. And, since the pressure is on to trim prices of existing homes, the pricing of new supplies, especially bigger homes in suburban areas, can only go down.

Hangzhou’s overall home supply surged to a new high of 10 million sqm in 2013, and enough land was sold last year to build another 14 million sqm of new homes in a year or two. Sadly, even during its heyday, just 7 million sqm or so was sold in the city over a year.

Official data say just 10,000 or so homes were sold in Hangzhou in the first quarter, more than one-third fewer than a year earlier, and the average price is 15,388 yuan per sqm, down 11.3 percent year on year. When the entire sector is heading down and customers are taking their time buying, it’s no surprise that the scramble for buyers sometimes turns violent.

– Contact the writer at [email protected]


EJ Insight writer

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