Monday, October 31, 2011

Shanghai Homeowners Protest over Falling Prices

I found this news about the protest against the falling prices on the home property in Shanghai, China recently, in Malaysia's newspaper portal. Unfortunately, this kind of negative news (which could affect the country's image) has been censored from the mainstream media like, television, radio, newspapers and even on internet in China. These Shanghai new homeowners were very frustrated with the developers who threw more promotions or lower the housing prices in order to increase the sales of the property. 

The property prices in China has becoming over expensive and unaffordable to the locals who intend to settle down. Just imagine, a small apartment (size: 89 m2 or 958 sq.ft) with 2 bedrooms and 1 bathroom outside Beijing city center in China, is currently selling at the price of 2 million yuan (US$314,200). The new homeowner must pay 40% of the property price as the down payment. 

When the property prices hits to the highest ultimate level (or also known as the real estate bubble), it will begin to decline when the potential homeowners can't afford to purchase properties anymore. This might happen to China property market if the government doesn't take immediate steps to control the property industry.

October 25, 2011, 4:17 PM HKT 
Shanghai Homeowners Smash Showroom in Protest Over Falling Prices
Source: The Wall Street Journal
(Photo: Reuters)
A real estate agent walks next to empty apartments at a new residential area in Shanghai September 8, 2011.

(Photo: Sina Weibo) A screenshot shows photos of the weekend’s property price protests in Shanghai posted to microblogging site Sina Weibo. Weibo users were largely unsympathetic to the protesters.

A group of around 400 homeowners in Shanghai demonstrated publicly and damaged a showroom operated by their property developer after the company said it cut prices. Home buyers had wanted to speak with the developer to refund or cancel their contracts but were unsuccessful, according to local media. One report said the price cuts exceeded 25% per square meter.
The local media reports said an unspecified number of people were injured. The property developer, a unit of China Overseas Holdings Ltd., didn’t respond to requests for comment. Photos of the event showed broken glass in the sales office, homeowners marching with banners and a phalanx of police watching over.

Chinese media separately reported that another group of Shanghai homeowners gathered on Saturday to speak with Longfor Properties Co., after it dropped asking prices to 14,000 yuan per square meter from 18,000 yuan per square meter at a residential development in the city’s Jiading district. Longfor didn’t return calls for comment. In an Oct. 20 release, it said it posted stellar sales following an aggressive sales strategy for three of its projects in Shanghai and in the city of Hangzhou.

Beijing has been tightening control of the property market this year to tame surging property prices, amid fears that unaffordable housing could lead to greater social unrest. Measures include a massive 1.3 trillion yuan program to build about 10 million public housing units for low-income earners this year, as well as limits of purchases of second homes and other restrictions.

Data in recent weeks have suggested that the curbing efforts are having an impact. China’s housing prices were largely unchanged in September from a month earlier and grew at a slower pace than in September 2010, indicating Beijing’s efforts to cool the real estate sector are having an impact.

Speculation has turned to whether authorities will now relax restrictions. On Monday, China’s eastern city of Nanjing said it would let residents borrow more money from the city’s housing provident fund to buy “ordinary homes,” in a move designed to give the struggling property sector a boost. While it didn’t elaborate, such homes are often defined as no larger than 140 square meters.

In the southern city of Foshan earlier this month, local officials announced they would lift some property-market restrictions, then postponed that move the next day “to seek further public opinion and to make an assessment on the effects of such measures”, without giving further details.

Chinese Premier Wen Jiabao on Saturday stressed that all levels of government need to reinforce China’s controls of the property market, and that tightening efforts in the property market and the construction of public homes in China are at a pivotal moment.

The Shanghai property-owner demonstration found little support on China’s Internet, where most still expressed worries that housing prices are too high. In an informal poll posted on the Twitter-like microblogging site Sina Weibo that had attracted more than 34,000 votes by Tuesday evening, 80% said they that thought it was normal for housing prices to fall and that the Shanghai protestors were just playing up the issue.

“This is an immoral action,” Weibo user Xiaobai Yeyou Naxieshi wrote in one of the 7 million property-related posts Sina had collected Tuesday on a special topic page. “Buying a house is a form of investment and every investment involves risk. If prices didn’t fall, people who can’t afford to buy an apartment would really have to wait forever.”

“Dear Government, can you please cancel my purchase of Petrochina shares? A refund based on the IPO price would be fine,” joked Linshi Renyuan. Petrochina, which debuted on the Shanghai stock market at 16.7 yuan per share in 2007, was trading at to 9.85 yuan per share at the end of the day Tuesday.

That said, a sustained drop in housing prices could spark its own displeasure. It could also spark criticism that Beijing’s policies don’t address long-term issues.

Outspoken Chinese real estate tycoon Ren Zhiqiang, whose properties haven’t been involved in the demonstrations, said on his microblogon Monday, “Does the government really want to solve the housing (issue) for the public or is it just using the property market as a tool to balance between economic growth and the public sentiment?”

“Why doesn’t the government work on land supply, land prices and tax incentives? Why doesn’t it raise wages and lower home purchase taxes, and raise the affordability for the citizens?” Mr. Ren asked.

-- Esther Fung with contributions from Amy Li and Josh Chin

News Analysis: China's home prices may drop further because of macro control   2011-10-24 14:39:07

BEIJING, Oct. 24 (Xinhuanet) -- "The rapid rise in property prices has been markedly contained, as the prices in some cities have begun to drop," the National Bureau of Statistics (NBS) spokesman Sheng Laiyun said in a press conference on October 18. 

In order to keep housing prices down, the government adopted a series of tightening measures earlier this year, such as instructing local governments to set new home price control targets, raising minimum down payments for second-home purchases, limiting purchases of new homes and introducing property taxes in the cities of Shanghai and Chongqing.

Chongqing, one of the two cities to impose property taxes this year - the other being Shanghai - posted the steepest decline as prices dropped 0.4 percent from August. Changsha, Kunming, Yinchuan and Luoyang had the largest gain, 0.3 percent, according to the NBS.  

As one market-cooling measure, the government has restricted residents in 43 major cities from buying second or third homes, resulting in a decline in property transaction volume in many of these cities.

Government control measures will yield far better results in first-tier cities than in second- and third-tier cities. Meanwhile, tightening property loans by banks in second- and third-tier cities has spread to big cities, which will further reduce buying demands.  

China Construction Bank Corp, China's biggest mortgage lender by assets, raised rates for first homes in Beijing to 1.05 times the central bank's benchmark lending rate, Xinhua News Agency reported on Oct 13.  It used to offer first-home buyers 30 percent off the benchmark rate. China Everbright Co raised its rate in Shanghai to the same level, according to Economic Information Daily.

The Legal Evening News reported that banks in 14 cities, including Guangzhou, Shenzhen and Shanghai, have raised mortgage rates for first-time buyers by 5 percent to 30 percent. In Changchun, Jilin province, some banks raised their rate by up to 50 percent, according to the newspaper.

1 comment:

Unknown said...

This is what happens when there are no property policies in place. Conveyancing Oran Park also has to be considered.

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