Real Estate

China homeowners stage protests over falling prices


A wave of protests by Chinese homeowners against falling property prices in several cities has raised fears of a downturn in the country’s real estate market, adding to pressure on Beijing to stimulate the economy.

Homeowners in Shanghai and other large cities took to the streets this month to demand refunds on their homes after property developers cut prices on new properties to stimulate sales.

In Shanghai, dozens of angry homeowners descended on the sales office of a complex that offered 25 per cent discounts to demand refunds, causing clashes that damaged the sales office, according to online reports that were quickly removed by censors. Similar protests have been reported in the large cities of Xiamen and Guiyang as well as several smaller cities.

The property sector is estimated to account for 15 per cent of China’s gross domestic product, with the total rising closer to 30 per cent if related industries are included. A downturn would add to financial strains on China’s heavily indebted property developers which paid record sums for land during auctions last year but are now struggling to recoup their investment

Other evidence of a downturn is starting to emerge. Sales by floor area dropped 27 per cent year on year during the “golden week” national holiday earlier this month, a peak period for house buying in China, according to research house CRIC, which tracks 31 cities.

Although average new home prices in China’s top 70 cities grew 1.4 per cent in August, the last month for which official figures are available, analysts say falling sales mean a period of price cuts has begun.

“Judging from our conversations with developers, September showed a price decline,” said Cindy Huang, director of corporate ratings at S&P Global Ratings.

Liu Lu, a property market researcher at the Southwestern University of Finance and Economics, added: “The downturn in the property market has just begun. People bought at the peak of prices in 2017, and now they feel aggrieved.”

Homeowners have demanded the government step in to resolve their disputes with developers and prop up prices.

“Property owners tearfully cry out on their knees for the government to serve the people,” read one banner held by protesters in the northern city of Pingdingshan after a property developer cut prices 20 per cent, according to pictures posted on social media.

China’s housing markets have been cyclical for the past decade, with Beijing cooling prices when demand grows by restricting home sales and stimulating when it wanes by relaxing property lending and releasing more land for development. 

Tightening mortgage restrictions, amid a government drive to deleverage the economy, have caused the recent property market weakness, along with reduced spending on a slum renovation drive that saw the central government fund purchases for relocated residents. 

Homeowners made similar protests during a previous downturn in 2014, but the amounts they stand to lose on their investments are now “much larger”, said Mr Liu. 

The protests highlight a dilemma for Beijing, which has vowed to make its economy less dependent on the property market for growth, but faces pressure from homeowners to keep prices rising.

“The government is trying to rebalance,” said Ms Huang. “Authorities are very keen to maintain stable prices, but its unlikely they will go out with a massive stimulus.”



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