Wenzhou property prices may fall further amid lack of willing investors

Wenzhou property prices may fall further amid lack of willing investors

Staff Reporter

2013-11-03

Wenzhou, formerly looked upon as a benchmark for China’s property market and whose property prices once approached that of first-tier cities such as Shanghai, Beijing and Shenzhen, has seen its property prices falling for 25 consecutive months at a time when 69 out of the nation’s 70 major cities saw their property prices rising, becoming the only major city that has seen declining property prices, the Beijing-based China Securities Journal reports.Recently, Wenzhou’s Lucheng District Court, took an unprecedented move by auctioning off properties and cars on Taobao, an online shopping website.

On Oct. 29, Lucheng Court conducted auctions for 20 properties on the website, and will soon auction off another 39 properties. Recently, it has closed auctions of 157 properties, 72 of which failed due to lack of any interested bidders.

Jinyu Park buildings attracted the most bidders among the properties auctioned, with a closing bid equal to about half of its peak price in 2010. Jinyu Park was built by Greentown China Holdings in 2006, and its price more than doubled to 100,000 yuan (US$16,400) per square meter in 2010 from its opening price of 43,800 yuan (US$7200) per square meter in 2008, pushing Wenzhou’s property prices to their peak.

Auction prices are usually lower than the property’s market value. Typically interested buyers will wait for the second or third auction to begin bidding, because the bidding price can usually be cut down by around 20%, insiders said.

Since early 2012, Wenzhou’s property prices have continued to decline, of which Greentown’s Jinyu Park saw the biggest decline, falling more than 50% so far.

Approaching the end of this year, many property developers have shown a willingness to further cut their property prices to reduce the pressure of huge property inventories, thus triggering rising possibility of further dips in property prices in Wenzhou.

Statistics show that Wenzhou’s property prices in September fell 1.8% from a year earlier, when it became the only city out of the nation’s 70 major cities to have a year-on-year property price decline, and marking the city’s 25 straight month of year-on-year decline. Wenzhou’s average property prices, however, still ranked the eighth highest nationally, according to Wenzhou mayor Chen Jinbiao.

Experts attributed the sharp decline of Wenzhou’s property prices to the market’s downward corrections after its previous surges during 2006 and 2011. Wenzhou’s average property prices jumped 330% to 34,674 yuan (US$5685) per square meter in 2011 from 8,045 yuan (US$1320) per square meter in 2006.

Wenzhou banks, as of the end of July, reported 580 cases of foreclosed houses, and 2,584 houses with non-performing loans, including 183 cases of foreclosures with pure mortgages, and 397 cases with mortgages with “collateral plus guarantees,” according to the regulator.

Banking sources said Wenzhou’s property prices are expected to encounter downward pressure because property speculators have sharply reduced amid economic hardship and most enterprises are facing year-end funding pressure to settle their accounts.