It’s Official: Shanghai Bans Property Price Discount Of 20% Or More26 October, 2011, 15:18. Posted by Zarathustra
Tags: Real Estate
Here I have noted that property developers in China are in trouble and sales volume dried up for the best part of the year, and with a disappointing Golden Week crushing any hope, developers are finally cutting prices. Then guess what? People who have already owned properties are getting really cross, and went to smash the showroom and sales office in Shanghai as developers are offering new flats which are some 30% or so cheaper than the flats they have already bought (and probably haven’t got delivery).
I have strong opinion about government intervention in the property market, as I noted that once the market trend is changed, there is very little that one can stop it. Remember that the Chinese government has tried to cool the property market for the best part of the past year or so with negligible success until recently. But now the government is worried that prices could fall too much too fast. As I said, there is really nothing the government can really do about it.
But China is, after all, run by a Communist Party. So even if they are really powerless, they will try. With the love of intervention, distorting the market with weird price control from time to time (which always fail), here comes the most useless but yet the most predictable thing one can expect from China. Mingpao reports that Shanghai government has banned China Overseas Land (688.HK) from cutting prices by 30% after angry homeowners went to smash things in the sales office. Regulator reportedly said that such discount is “obviously violating the regulation”, and now any projects which are offering more than 20% discount should be re-filed to the regulators before sales.
So there you have it, property developers have been squeezed as volume dry up, and just as they finally face the reality to cut prices, the government helps to dry up the volume once more by banning price cutting so that they can’t sell as many as they would have wished. Socialism at its best (sarcasm).