China’s developers have turned to luxury cars and other promotional deals in an attempt to attract consumers as inventories of unsold homes stand at a three-year high of 430 square kilometers.
While only a few major developers earned money from operations and investments in 2014, their combined net debt hit an all time high of 919 billion yuan. In order to escape the spiraling debt, developers are using eye-popping incentives in a desperate bid to earn big money, and they’re far beyond foreigners hired to pose as professional athletes.
Hopson Development Holdings Ltd. offered free Porsches and discounts up to 11 percent to their first 30 apartment buyers. The move earned them 300 million yuan on apartments under construction at its complex in Guangzhou.
Evergrande Real Estate Group Ltd. is letting homebuyers cancel purchases and get a full refund any time before they move in, no questions asked. Buyers from Country Garden Holdings Co. were allowed to defer down payments until a month after they signed their contracts. The company even asked all its employees to advertise their offer on their WeChat accounts.
“Developers cite clearing inventory as their key focus in 2015 because of falling margins and negative operating cash flows,” Morgan Stanley analysts, led by Hong Kong-based John Lam, were cited as saying in a Straits Times report.
To further help developers boost sales and prices, the Chinese government started reversing course last year. Even though sales across the country increased by 32 percent in May, developers were seen buying less land. Construction has also decreased by 16 percent, suggesting that they aren’t too convinced about the recovery.
[Image via Sina//Fang.com]
By Sharon Choi