Angry homeowners of several residential projects in Shanghai flocked to their developers' sales offices over the weekend, seeking refunds or purchase cancellations after big discounts have been offered by developers to trigger sales.
Hundreds of infuriated homeowners gathered at an office building in Lujiazui of the Pudong New Area on Saturday afternoon, demanding a face-to-face talk with China Overseas Property (Group) Co, which has cut home prices at one of its projects in Pudong that averaged 22,000 yuan (US$3,454) per square meter to around 16,000 yuan per square meter during its latest promotion held in collaboration with a major real estate website for group buyers.
"I bought a home, scheduled to be delivered next August, for 2 million yuan, or around 22,500 yuan per square meter, in June, but just found that group buyers have been recently offered a price of only 16,000 yuan per square meter during a recent promotion launched by the developer in cooperation with Soufun," said a homeowner surnamed Zhu. "Such huge loss just couldn't be accepted."
Two residential projects in outlying Jiading District, on the same day, also witnessed a similar scenario after developers reduced sale prices by between 25 and 30 percent, leaving current homeowners in wrath.
Developers of the three projects, however, all declined to show up.
"While current homeowners of those projects do deserve our sympathy for their notable loss, their actions were actually not legally protected because once they signed a home-purchase deal, they should always be responsible for their own decisions," said Song Huiyong, research director with Shanghai Centaline Property Consultants Ltd, operator of the city's largest real estate chain in terms of transaction value. "This might be a good lesson for home buyers that property purchase, like any other buying, always involves some risks."
Chen Wei, an attorney with a local law firm, agreed. "It is legitimate for real estate developers to adjust their prices under changing market environment," said Chen. "And it's just like stock buyers could never seek compensations from listed companies once share prices fall."
Property developers around the country are facing tight liquidity amid poor sales under the country's austerity measures but notable discounts - such as 30 percent - are still quite rare in the Shanghai market, industry analysts said.
"The majority of developers are now providing discounts of no more than 10 percent to buyers," Song said. "As far as I know, only a few developers, like what we've seen in the above three cases, have begun to offer some notable cuts at one of their projects while they still keep prices rather stable at the rest of their projects. Through this kind of approach, they would be able to somewhat replenish their capital and therefore put themselves in a better position to stay longer in the battle against government rein-in efforts."
In Shanghai, a total of 204,000 square meters of new homes, excluding affordable housing, were sold during the first 16 days of this month, the lowest for the same period in six years and a drop of nearly 73 percent from same period of last year, according to Shanghai Uwin Real Estate Information Services Co.
Recent interest rate hikes by some commercial banks on mortgages for first homes will further dampen sentiment among home buyers and therefore raise pressure on developers for larger price cuts, analysts said.