Real-estate developers are offering discounts at more residential projects across Shanghai — even in prime locations — as home buyers tighten the purse strings.

"Price wars already seem inevitable as transaction volume of commodity houses has been low in Shanghai for quite some time amid a prevailing wait-and-see attitude," said Xue Jianxiong, head of research at Shanghai Uwin Real Estate Information Services Co, a major tracker of the city's property data. "Most developers have to follow suit so as to garner cash for survival."

Brilliant City, a super-sized residential project on Zhongtan Road in Putuo District within the city's Inner Ring Road, sold a total of 29 apartments a week ago at an average price of 13,842 yuan (US$2,025) a square meter. That compared to the 21,049 yuan a square meter average during the first six months at the project. Though industry insiders said low-level units were all sold to company staff, the price gap is still significant.

A high-end residential project in downtown Jing'an District, which was asking prices of between 41,800 yuan and 44,000 yuan a square meter for a new batch of apartments last month, has recently been selling them at an average price of 33,575 yuan a square meter.

"The market has been tough and even developments with prime locations, previously regarded as the most risk-free, have been affected," Xue said.

Sanlin area in Pudong is another major battlefield for real-estate developers. China Vanke Co and Gemdale Corp, two of the country's leading property companies, recently launched big price cuts at their projects there which sit about a kilometer away from each other.

The two firms both introduced cash rebates of as much as 100,000 yuan per unit in an effort to lure home buyers.

Huang Hetao, an analyst at Century 21 research center, said the fact that housing prices soared too rapidly in the area during the market boom as compared to the average growth rate elsewhere in the city might be another major reason behind such price slashes.

According to latest statistics gathered by Uwin, the average price of new homes in Beicai in Pudong, Wanli in Putuo and Dahua in Baoshan all retreated to below 14,000 yuan a square meter from more than 16,000 yuan a square meter.

"Under the current environment, developers offering discounts first will likely benefit the most," said Cai Weiming, a renowned industry veteran. "Companies which don't follow steps for fear of losses might find it hard to survive and will probably lose more later."

Quick money has become the top priority for many of the country's real-estate developers, as the falling trend has been nationwide. For big companies, which usually run many projects at one time, cash flow would be critical, industry insiders said.

Some of the country's major real-estate developers are suffering a dip in sales.

China Vanke, the country's largest publicly listed real-estate developer and also the biggest residential developer, reported earlier this month it sold a total of 360,000 square meters of property in July, down 27 percent from a year earlier. Sales, meanwhile, fell 15 percent to 3.11 billion yuan.

And Gemdale, the Chinese developer partnered with ING Groep NV, also saw drops of 31.8 percent and 25.8 percent last month in areas sold and sales, as compared to a month earlier.

The National Bureau of Statistics said sales of new housing fell 1.1 percent in the first six months of this year across the country and areas sold dropped 6.9 percent from the same period a year earlier.

(Shanghai Daily August 26, 2008)