China, Singapore developers offer more carrots

Two Chinese property developers have turned to offering buyback guarantees in a bid to revive demand and boost sales.

Hong Kong
Source: Bloomberg

This comes as consumer sentiment has been weighed down in recent weeks over property slump concerns, which were reflected when new home prices fell for the first time in two years in May.

The gloomy outlook has pushed developers in two of China’s weakest housing markets to make buyback guarantees. In Hangzhou, where prices fell the most in May, Shanheng Real Estate Group is allowing buyers to sell back their apartments within five years for 40% above purchase price. Similarly, DoThink Group in Wenzhou city will offer 20% above purchase price after three years.

Other measures that industry players have been taking to mitigate the impact from the softening market include price cuts and delaying projects. In May, China’s largest developer, Vanke, warned that the golden era for the sector was over and it would focus on building homes for owner-occupiers rather than investors.

There’s obviously some concern over the real estate sector, because it accounts for over 15 percent of China’s economic output, and can potentially drag down other business sectors and pose a growing risk to the broader economy.

Singapore softening

The softening property outlook is also shared by Singapore, where private home prices fell for the third straight quarter, in the three months ended June. This was also the market’s longest losing streak in five years.

According to preliminary data from an index by the Urban Redevelopment Authority, prices have dipped 1.1% to 209.3 points in the June quarter, extending the decline of 1.3% in the previous three months.

Similarly, Singapore developers have also started to push discounts and offer sweeteners such as reduced prices for early purchases and free furniture vouchers.  

The softening market has already prompted Singapore’s second largest developer, City Developments, to call for the government to review its property cooling measures. Its chairman Kwek Leng Beng warned that Singapore could otherwise lose its competitive edge as an investment destination.

Ahead of the Singapore Open

S&P 500 hit another record high on the back of some encouraging manufacturing data from the US and China. Chinese stocks also had a lift from the country’s positive manufacturing PMI number, where we saw official figures for June hit a six-month high.

On the back of the latest data on Singapore property prices, we could see some interim pressure on developers such as City Developments (CDL), UOL Group, and CapitaLand.

We are calling for the MSCI Singapore to open flat at 368.20.

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