Scrambling To Sell Properties: Wenzhou Edition18 August, 2011, 0:16. Posted by Zarathustra
Tags: Property, Real Estate, Wenzhou
Wenzhou is a city famous for producing lighters. It also produces many real estate speculators who have been buying properties everywhere from their home town to Hong Kong, and probably even Dubai and others. Now in their home town, however, they are scrambling to sell their real estate holdings.
NBD reports that the rush to sell started probably two weeks ago. The selling pressures started from two groups of people: cash-strapped speculators, and cash-strapped business owners
One speculator was a shoemaker. He borrowed money from a bank for his business, but much of the money ended up going to the real estate market. As the real estate market cools amid increasingly aggressive cubing measures and monetary tightening, he had to borrow money from non-bank institutions (that basically includes loan sharks, pawnshops and others) at very high interest rates. Finally, he decided to sell his property and cut prices. Even after price-cutting, however, most people asking were not really serious about buying it.
Many business owners are also selling properties to save their own businesses as bank credit are very tight, and non-bank credit has very high cost, so selling properties would be a better choice. One real estate broker said that a business owner is selling a RMB80 million townhouse, and 2 days ago the owner of this house told the broker that because his company needs cash urgently, and as bank loans have not been approved, he was willing to cut price by RMB5 million if there are a ready buyer.
The selling pressures seem to make people panic, especially for those who are waiting to sell as buyers do not seem to be very interested. That’s not surprising, because after rounds and rounds and price curbing, purchase restriction, and monetary tightening, they have made it harder for speculators to own multiple properties, and mortgages are harder to get. Thus there is very little wonder that sellers are so desperate to find willing buyers.
If this phenomenon in Wenzhou is representative for things happening in China, or if this sort of things are going to happen in other places in near future, this does not bode well for Chinese real estate sector.