The nation's most resilient real estate market is starting to show signs of weakness, with several developers slashing prices in prime downtown locations by up to 5,000 yuan per sq m.

The 29 units at the Zhongyuan Liangwan Cheng development in the Putuo district were discounted by 7,200 yuan per sq m, selling for an average of 13,842 yuan per sq m, according to property researcher Uwin.

Forte also cut prices by more than 5,600 yuan per sq m on its Da Hua Graceful Oasis flats in the Pudong district, which now carry a price tag of 13,551 yuan per sq m.

"But a price adjustment of over 30 percent is quite unusual. As far as I know, those 29 units were sold to Zhongyuan employees," according to Yang Hongxu, deputy director of the E-house China R&D Institute.

Property developer Vanke, known for its high-end projects, also lowered prices at its Jinse Yazhu development in Pudong Sanlin by 6 to 20 percent.

The average residential property price was 9,545 yuan per sq m in July, down 13.8 percent month-on-month, property consultancy CB Richard Ellis said.

A total of 1.1 million sq m of new residential apartments changed hands in Shanghai in July, down 61 percent on a monthly basis, according to the China Real Estate Index System (CREIS).

Meanwhile, 277.43 million sq m of residential apartments were sold nationwide in the first seven months, down 10.8 percent year-on-year, the National Development and Reform Commission said.

A CREIS survey found that 27 percent of Shanghai apartments dropped in price in August, with a 3.7 percent price weakening overall. But only five residential projects slumped by more than 1,000 yuan per sq m.

David Chen, senior director of CB Richard Ellis' residential division in China, said the figures are "normal". Chen said the recent market downturn is a mild correction to last year's breakneck growth.

"Many factors have contributed to the current market slump, such as the global economic slowdown and the tighter monetary policy that includes strict down payment requirements for second homes and more stringent rules on mortgages," Chen said.

"If the macroeconomy maintains the status quo, Shanghai's property prices will stay low for a few years, with a 3 to 5 percent rise to counteract inflation," Xue Jianxiong, director of Uwin, said.

The average trading price for Shanghai property rose to 9,545 yuan per sq m in July, up 9.3 percent year-on-year, although the price was down from June's 11,073 yuan per sq m, according to CB Richard Ellis.

But gauging the market by transaction price rather than volume can be misleading, Chen said. After the Olympic Games, major developers including Vanke lowered prices on residential apartments, but the current figures won't show this trend, he said. Sales of high-priced prime residential flats also lift average prices.

Last year's bullish property market came after a bearish period of over two years, and trading volume in Shanghai's residential market is unlikely to rebound until the middle of next year, he said.

But according to Xue, prices will not fall too far. "Zhongyuan and Vanke have already lowered prices. I would imagine that in the next two months we will see widespread price cuts. But they are likely to be modest."

(China Daily September 19, 2008)