Photo: Xinhua

China's real estate market may plummet as much as 50 percent in the first quarter due to halted market activity amid the coronavirus outbreak, and developers will face increasing liquidity pressure, according to experts. 

The property market is among the hardest and most directly hit industries by the epidemic. According to a report by Liu Xuezhi, an economist at the Bank of Communications, sales growth in 35 cities since the beginning of the year have fallen 31 percent year-on-year.

"Judging by the suspended sales and marketing activity, the total drop in the market value in the first quarter could be up to 50 percent," Qin Gang, executive director of the China Real Estate Thinktank, told the Global Times on Sunday.

In the latest attempt to revive demand in the weakened real estate market, China Evergrande, one of the top real estate developers in China, started online sales. In February, 99,000 properties were subscribed online, with a total value of 102.7 billion yuan ($14.7 billion). 

However, Qin said that the effects of online marketing and sales, which are now being deployed by several other developers, might be limited, but discounts to boost demand can be expected to last at least for the first half of the year. 

"Companies such as Evergrande in the property industry are among the most debt-squeezed, that's why they are offering considerable price cuts," Qin said.

"To solve short-term liquidity problems, companies need to cut their profits to stimulate people to buy quickly," Qin added. 

According to Qin, some other major developers, such as Yango and Country Garden, are known for tight liquidity and high debt levels, and they will have to make considerable compromises in property prices to maintain their cash flow. 

Quick turnover is the key to survival for many developers. In 2019, over 30 real estate companies in China had a debt-asset ratio of more than 80 percent, according to a report by bjnews.com, and four companies' ratios were above 90 percent. 

However, despite short-term liquidity pressure, demand in the housing market is generally believed to be inelastic and a rebound is expected to quickly follow once the coronavirus outbreak is over. 

Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times that short-term demand is diminished by halted market activity all over the country, but as the market starts to resume in places less hit by the epidemic, offline sales and marketing activities will start to take place, too.

"The long-term domestic demand for houses is not easily dented due to the coronavirus," Yan said. "However, it is concerning that first-home buyers are likely to delay purchases, so it is crucial for sales centers to reopen and introduce discounts as buyers are very sensitive to prices."


Newspaper headline: Housing market to drop 50% in Q1 due to coronavirus: experts