More discounts seen in Q2

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There may be more real estate developers in China cutting prices as early as the second quarter of this year due to tighter credit and continued sluggish sales, industry analysts predicted yesterday.

"The central bank's latest interest rate hike, coupled with high expectations for similar moves over the rest of the year, will probably force more developers to abandon their 'wait-and-see' approach and offer major discounts as soon as the second quarter," said Huang Hetao, a research manager with Century 21 China Real Estate.

Effective yesterday, the benchmark one-year lending rate has gone up to 6.31 percent, up 0.25 percentage point, the People's Bank of China said late Tuesday. It was the second interest rate increase by the central bank this year as the government continued its battle against high inflation.

Yang Hongxu, a researcher at E-house China R&D Institute, also predicted that there may be significant price cuts either this month or in May, initially in the first-tier cities.

By May, developers may cut prices sharply in gateway cities like Beijing and Shanghai as the firms are facing intense capital pressure amid a plunge in transaction volumes, Yang told the Economic Information Daily earlier.

Residential property sales dived to a record low across the country in February as an immediate result of the government's tighter measures.

The domestic housing market, in general, is still struggling hard to regain its momentum although the traditional slack sales season - January and February - has already gone.

In March, nearly 80 percent of the 30 major cities monitored by the China Index Academy, a real estate research body, posted an annual decrease in property sales, with Beijing dropping 48 percent, one of the largest in the country.

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