- October home prices fell across China in 33 of 70 cities
- Developers are attracting buyers with free iPhones, name brand bags and even luxury cars
- A company in Wenzhou is giving away free BMWs to its first 150 buyers
- "If you have money right now, it's a good time to invest," said one Chinese entrepreneur
As China's cooling real estate sector shows no sign of easing, some struggling companies are taking creative measures to attract buyers with promotions such as free iPhones, name brand bags and even luxury cars.
The promotions are desperate measures as China's housing prices continue to plummet.
In one of the biggest dips this year, October home prices fell across China in 33 of 70 cities like Shanghai, Wenzhou, Shenzhen and Guangzhou year-on-year, according to a report released by the National Bureau of Statistics on Friday.
In Wenzhou in China's eastern province of Zhejiang, property prices dropped the most among 70 cities with a 4.4% dip compared to 0.5% in Beijing and 0.2% in Shanghai. It's a significant blow to developers that have experienced years of prosperous growth in the wealthy coastal city of Wenzhou.
The downturn has forced developers to get creative. Buyers are flocking to one real estate company in Wenzhou that's giving away free BMWs with every purchase to its first 150 buyers. The promotion has already attracted 130 buyers in the past two weeks , the company said.
"Because of the current cooling real estate market, we want to sell these homes faster," said Lin Jianzhong, a sales agent at Central Palace, a new 900-unit housing complex being built in the suburb of Yueqing in Wenzhou.
"After we advertised this promotion, our sales shot up," said Lin. "People have been excited and are coming because they saw our ads about our BMW giveaway--after all, it's a BMW."
Lin said real estate developers are slashing costs in Wenzhou as recent government policies are restricting potential buyers from purchasing their third or fourth home and prices in the city have already dropped an average of 20% this year.
"Right now, developers are trying to liquidate their assets," said Hao Zhao, a Shanghai based economist for Australia and New Zealand Banking Group.
For years, China's burgeoning real estate market has been a source of economic growth—fueling huge demand for steel and cement and accounting for about 20 percent of the economy. But now, analysts are predicting the economy will suffer if China's property prices fall by as much as 30% over the next year as the government continues to clamp down.
"It's possible home prices will fall anywhere between 10% and 30% over the next year," Hao said. "And if there is a slump, it will be a significant downside risk for China's economy ... and the economy could lose some momentum."
Developers and manufacturers aren't the only ones suffering. Earlier this month, Centaline Property Agency, the country's biggest real estate agency, announced plans to close 60 branches and lay off about 1,000 employees around the country due to poor sales.
In Wenzhou, the property decline has also contributed to hundreds of private companies going bankrupt and unable to repay hundreds of millions of dollars in debts to underground lenders.
Last month, Chinese Premier Wen Jiabao visited Wenzhou to ease concerns from businesses in trouble, saying that the government would implement measures to help small-to-medium size businesses get bank loans.
Potential home buyers in Wenzhou like Lai Guoqiang are also optimistic about the future of the once-burgeoning property market. He said lower prices could make it more affordable for ordinary citizens to invest and buy their first homes.
"Promotions like this one are signs that the market is not so good and has been affected by government policies," said Lai, a Wenzhou-based entrepreneur. "If you have money right now, it's a good time to invest."