SHANGHAI (AP) — After booming in recent years, China's real estate market is finally beginning to feel the pinch from sagging demand and tighter controls.
One of China's biggest real estate agencies, Chuanghui Real Estate, has shuttered dozens of outlets in Shanghai and other cities, leaving behind angry customers and employees, after an ill-timed expansion just as the market was peaking.
Several other agencies around the country also have closed down or scaled back.
So far, the retrenchment appears to be mainly limited to property brokers — the businesses first to feel the pinch when people stop buying new homes, for whatever reason. But the moves could herald the beginning of a broader slowdown in one of Asia's hottest real estate markets.
The government has been wrestling to get control of the property sector, worried that rising prices for housing are pushing poorer people out of the market at a time when overall inflation is surging.
Regulators stepped up curbs on the property market last year, alarmed that "bubbles" in property prices could collapse and trigger a financial crisis.
Those efforts are starting to take effect. While urban housing prices in December rose 10.5 percent from a year earlier, a sharp slowdown in sales transactions in recent weeks suggests a new trend.
In the first week of 2008, home sales in Beijing fell 20 percent compared with the previous week, the state-run newspaper China Securities News reported. Sales were off 38 percent in Shenzhen and 52 percent in east China's Nanjing, it said.
"At the peak, the sales volume was several hundred, even a thousand a day," said a salesman for property broker Centaline China in the southern city of Shenzhen, who gave only his surname, Wang. "Nowadays, volume is very low, with only a couple of apartments changing hands each day."
Real estate agents say the slowdown started in the autumn, but because of property supply and property hoarding by developers, the impact hasn't been seen yet in prices.
So far, there are no signs of a mortgage meltdown in China similar to that seen in the United States, and market specialists don't foresee property prices falling substantially. Strong economic growth and surging demand from upwardly mobile families are supporting demand, especially for newly built housing.
But business is slowing, especially for the so-called "second-hand" apartments that are the lifeblood of local realtors in this newly commercialized market.
"In 2008, we think property developers will face some liquidity problems and financing issues," Matthew Kong of the ratings agency Fitch Asia Corporates said in a teleconference briefing Friday.
In November, Shenzhen-based Zhongtian Real Estate closed down amid reports its CEO had gone into hiding. Last month, Shenzhen-based Changhe Real Estate and Beijing-based Xinyitian closed dozens of branches.
Until a decade ago, China's housing was mainly owned by the government and by state companies, and leased to workers at nominal rates. Since then, the state has sold most of those apartments to their occupants at subsidized rates, privatizing the market and creating a new class of homeowners.
The property market took off after 2000. For more than three years, authorities have been trying to cool the market by raising taxes and tightening restrictions on sales of residential property.
"They don't want the bubble to suddenly go bust," said Fitch's Mr. Kong. "The government is determined to stop that trend."
The main target has been speculative property trading, or flipping, mainly by well-off locals and outside investors from other provinces and Taiwan.
The crackdown also may be aimed at curbing rampant fraud in housing lending, reports suggest.
State-run China Central Television's "Economic Half-Hour" program recently featured the story of a man named Fu Yongde whose identity was reportedly stolen by a property development company in order to obtain a fraudulent $138,000 loan for nonexistent property.
Still, huge inflows of investment kept the market lively until late last year.
Since then, trading volumes have dropped by nearly three-quarters compared with a year earlier, said Zhang Min, head of corporate planning at Chuanghui's headquarters in Shenzhen.
"The government's credit tightening has really affected the real estate market," Mr. Zhang said. "The entire industry is in crisis."
Mr. Zhang said his company had cut the number of outlets by 1,100 to 700 after an expansion that its chairman, Lin Fenghui, described in an online interview on Sohu.com as "too fast and too big."
Mr. Zhang said Chuanghui was selling some branches to help weather its "temporary financial difficulty," but denied it is facing bankruptcy.
"We are taking effective measures to solve the problem," Mr. Zhang said. "The money customers left with us will be safe."