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Wednesday, November 2, 2011

Chinese home buyers not so easy to please

BEIJING: China thought it had a good plan: Bring down soaring house prices so millions of frustrated wage-earning families could afford new homes, and social harmony would follow.

However, furious protests by existing home-owners against price-cuts on new developments show that the road to real estate equilibrium is a rocky one.

For every aspiring home buyer in China thwarted by a speculative property bubble that has seen house prices in key cities jump nearly 10-fold in 10 years, an existing home-owner is anxious to see the biggest investment they're likely to ever make keep rising.

Anxiety built to anger in Shanghai on Oct 22 after Longfor Properties cut prices on the latest phase of a housing development to revive stalling sales at the site.

A mob of about 300 people smashed up the development's sales and demonstration centre, according to local media reports.

All had bought homes in earlier phases of the project at prices as much as 30% above current selling levels which Longfor insists just reflect market conditions.

“We decided the price according to market demand,” the company said in a statement emailed to Reuters. “The promotion, which ended on Oct 20, was an effective one when the company proactively grasped the right market opportunity.”

Hundreds of home-owners were on the same Shanghai street a day after the Longfor incident, staging a smaller protest in a Green Land Group development. There's been uproar at sites developed by China Overseas Land, Sino-Ocean Land and Huaye Real Estate Co.

Protests have flared in Beijing as well as Shanghai and threaten to spread. Social unrest is anathema for China's ruling Communist Party.

“The protests run an alarm to the public that gone is the time when home prices only rise and never fall. Investors need to be cautious,” the People's Daily, the top party newspaper, said in an opinion piece posted on its website on Oct 26.

Property is a touchstone issue in the world's second-biggest economy, generating around 10% of China's GDP.

Besides would-be buyers and profit-hungry developers, local governments across the country rely on income from land sales to service debts estimated at 10.7 trillion yuan (US$1.7 trillion) and fund construction of roads, railways and schools.

By Reuters

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