Buy a house, get a free BMW! China developers are getting desperate

[SHANGHAI] Chinese property developers are offering free luxury cars and hefty discounts to lure buyers as lending curbs and funding constraints squeeze their finances.

China Merchants Shekou Industrial Zone Holdings Co is giving away a BMW Series 3 or X1 to buyers of a three-bedroom unit or townhouse at its Shanghai development. The car, or cash equivalent, equates to about a 10 per cent discount on the 3.1 million yuan (S$621,000) price of the 89-square-metre apartment.

At China Evergrande Group's 646 nationwide projects, a basic 11 per cent price cut widens to as much as 26 per cent once extra perks, such as discounts to buyers referred by Evergrande employees or previous buyers, are thrown in. A further incentive: The developer is accepting an initial down-payment of just 5 per cent, compared with the usual 30 percent deposit required by local governments.

The giveaways and discounts suggest debt-laden developers are pulling out all stops to raise revenue, with the sector facing a record US$23 billion maturity wall in the first quarter of 2019. At the same time, China's determination to keep a lid on home prices has made it harder for developers to generate swift cash from sales.

"Financing is becoming hard for everyone, even including the giant players," said Sabrina Wei, head of northern China research at Cushman & Wakefield in Beijing. "They need discounts to boost sales and collect cash."

Developers in neighboring Hong Kong are also offering perks such as free holiday and travel packages and easy credit to lure buyers in a sign one of the world's hottest property markets may finally be cooling.

At China Merchants Shekou's Harmonious development, prospective buyers have signed up for just 25 of the 350 apartments, local land registry filings show. Only eight buyers signed up for Gezhouba Real Estate's 223-unit Magnolia Garden project in Shanghai's west. In the city's north, Sanxiang Impression Co's 161-unit complex enticed just five people.

"Property projects are no longer an easy sale," Cushman's Wei said. "We may soon see this prolonged upbeat property season behind us."

BLOOMBERG