(Yicai) June 19 -- Homebuyers in Beijing are cautiously eyeing deals, especially those for second-hand homes, in the city of strict housing policy amid developers' big discounts.

Several other large cities, such as Shanghai and Guangzhou, have relaxed their housing policies in stride after multiple authorities under the Chinese central government issued supportive policies on May 17. However, the municipal government of Beijing refrained from lowering its downpayment ratios and mortgage rates to avoid reigniting the market frenzy that tormented the city for years since 2015.

Buyers' wait-and-see attitude has forced developers to offer significant discounts to accelerate cash flow recovery. For example, one project in the southern part of the capital city was reported last weekend to offer a special discount for certain apartment units, pricing them to as low as CNY49,000 (USD6,753) per square meter, much lower than the project’s government-guided price of CNY72,000 per sqm. 

The discount is not an anomaly as a neighboring project was selling at an average price of CNY65,000 per sqm despite the suggested price of CNY72,000 per sqm.

The same builder sells homes in another area located south of Beijing for as little as CNY70,000 per sqm even though the suggested price is CNY83,000 per sqm. A brokerage in charge of distribution said to Yicai that because of huge marketing pressures, the developer of the project just aims to break even with a small margin. As a result, the company kicked off sales as early as possible while offering deep discounts.

Cheap Pre-Owned Homes

On the other hand, since sellers of pre-owned houses have more freedom in price negotiations, the recovery of the second-hand home market is more prominent.

Prices of pre-owned homes in Beijing decreased by almost 9 percent last month from a year ago, or fell 1 percent from April, according to the latest official data. In contrast, prices of new homes dropped just 2 percent year-over-year, or slid by 1 percent month-over-month. 

Consequently, the number of sales contracts for second-hand houses signed online rose 3 percent to exceed 13,380 from a year ago whereas the corresponding number of deals for new homes slumped by 39 percent to nearly 3,210 contracts, according to the local bureau of housing and urban-rural development. 

Buyers are viewing both new and second-hand homes so big discounts on pre-owned homes will hurt the demand for new homes, Guo Yi, chief analyst of Beijing-based real estate consultancy United Harvest, said to Yicai.

The city has been maintaining a level of 2,000 to 3,000 transactions of new homes per month this year, fewer than during the same period of last year because many potential buyers opt for cheaper pre-owned homes.

Guo said that to reverse the trend, builders should either follow the pricing trend of second-hand homes or improve product quality through interior design and decor to attract clients. 

Editors: Tang Shihua, Emmi Laine