(Yicai) Nov. 27 -- Investors looking for bargains are appearing in the wake of government polices to rekindle China’s real estate market, as falling sales and a slow recovery in cash flow force developers to sell high-quality assets at steep discounts.

Properties are selling very cheaply as a result of their owners’ financial difficulties, Liu Shui, enterprise research director at the China Index Academy, told Yicai. Discounts range from 30 percent to 40 percent, hitting 50 percent in some cases, he said.

“In a sluggish market, where liquidity is poor, big discounts are needed to attract new investors to bulk real estate assets,” Liu said. With urban apartment prices down more than 30 percent, deeper discounts come into play for assets that cost much more, as they have fewer potential buyers, he pointed out.

Troubled developer Sunac China Holdings had the land use rights for four plots in the city of Qingdao seized by the local government recently. They will soon go up for sale at a court-ordered auction, with a starting price 30 percent below their appraised value.

Shimao Group, another struggling builder, used 12 plots in its Shenzhen-Hong Kong International Center project to offset CNY10.4 billion (USD1.4 billion) of debt in July. That was a 36 percent discount on their appraised value of about CNY16.3 billion.

Even in Shanghai, home to China’s most active and comparatively liquid bulk real estate market, many projects are being sold at big deductions.

Office buildings are the most discounted property type, with some prices dropping to as little as 65 percent of the assessed value, Lu Qiang, co-director for East China capital markets at Cushman and Wakefield, told Yicai.

Hotels and serviced apartments offer the smallest discounts, as their cash flows are relatively better, he added.

Near-Term Prospects

Market insiders are divided on the short-term outlook for the bulk property market. A source in bulk asset transactions in Shanghai said that given the current economic climate, prices for most assets, except core resources, are likely to decline further.

Others are less pessimistic, noting that the market is already oversold since prices have plunged compared with when owners bought properties, combined with the capital cost and time cost borne by the owners during the holding period.

In fact, the market has shown signs of thawing, as the buying of commercial and office buildings sped up last month, thanks to the latest government support, according to Lu Qiang. Deals are closing quicker than before, he added.

China’s central bank brought out measures to bolster the property market in late September, including reducing rates on existing mortgages to align with those for new loans and lowering the minimum down payment required for second homes.

Activity at court-ordered auctions is also picking up. Last month, 29 percent of all apartments listed on judicial auction platforms were sold, up from 23 percent in September, a survey by China Real Estate Information showed.

Cities such as Beijing, Chongqing, Hangzhou, Ningbo, Shanghai, and Shenzhen saw rates exceed 50 percent, the survey found. The figure was about 16 percent overall in the first half.

Editors: Tang Shihua, Futura Costaglione