Recently introduced regulations, new government policies and the dour global economic climate are adversely affecting the mainland's luxury property market, according to analysts. Regulations imposed on buyers late last year and the drying up of credit lines in China, especially in the real estate market, have cut developers off from traditional sources of capital - revenue from property sales, and bank loans.
'We have certainly seen a significant slowdown in transaction volumes throughout the country, which has resulted in average prices dropping in some cities,' said James Macdonald, senior manager of the China research department at Savills. 'Nevertheless, prices in other cities have remained firm, while yet others, who did not experience rapid price appreciation, have continued to see some upward movement in prices.'
Some properties, especially those owned by large investment banks in the United States, could be sold off to ease cash shortages, said Zhong Liang, head of China wealth management research for UBS Securities.
'Due to the economic slowdown, the demand for luxury apartments has fallen and fewer corporate executives are being sent to China,' he said, adding that furnished luxury apartments would be affected in the property market correction.
'Fortunately, China is less exposed to the global credit crunch, but debt funding is also limited due to local monetary tightening measures,' said Josephine Sye of China Properties Group.
'In recent weeks, the central government appears to be relaxing credit control measures, as demonstrated by the reduction in the interest rate and the reserve ratio last week.
'That said, there is still plenty of equity looking to be placed in real estate assets by investors such as German funds, who are less reliant on debt funding. Another interesting trend, as we are now seeing, is the re-emergence of Japanese investors in acquiring properties and assets in developing countries including China.'
