A housing bust in China
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ShanghaiDaily.com is noting As home prices slump some buyers want out.
SHANGHAI government said yesterday it will not take action to settle the growing number of disputes involving home buyers who want to cancel purchase agreements and get their refunds back, city spokeswoman Jiao Yang said yesterday.Let's see
Her remarks were directed at apartment buyers who have asked developers for refunds because the value of their property has dropped significantly since the time of purchase.
Jiao implied the disputes were private economic matters.
The biggest case reported so far involves 51 people who bought residences at Shuian Lanqiao, a residential project developed by Shanghai Dahua Group in Baoshan District.
The buyers, who purchased property at the end of last year or the beginning of this year but have not yet taken possession of their homes, said new projects in the same area are selling for 8,000 yuan (US$995) to 9,500 yuan a square meter.
They said they paid 9,000 yuan to 14,200 yuan a square meter when they bought similar properties earlier.
"I would rather pay a fee for breaching the sales contract than bear a bigger loss incurred by the drop in prices,"said a buyer surnamed Chen.
Dahua Group, one of the city's biggest developers, was not available for comment yesterday.
Many buyers have also stopped paying back their mortgage loans, aiming to put pressure on developers.
Similar refund campaigns have been reported at other developments around the city since housing prices began falling in June after the government imposed austerity measures to cool down an overheating market, including higher taxes and increased mortgage rates.
Shanghai's housing prices, which climbed 20 percent climb last year, reportedly dropped 7.9 percent between June and October.
Transactions have also remained low as many buyers are awaiting further price declines.
The refund rush poses a sharp contrast to the sales craze before June when buyers waited in line for new apartments.
Analysts said the housing slump has also burdened developers and banks.
"Developers are under increasing capital pressure due to slow demand for new homes," said Fang Lei, an analyst with eHouse.com, an online real estate services company.
"Even if developers were willing to give refunds on these units, it would be difficult for them to resell the property under the current situation."
Meanwhile banks, which have been the major financing source for home buyers and developers, may face an increase in nonperforming loans, Fang said.
- Buyers want refunds
- Lawsuits
- Reselling is difficult
- Breach of sales
- Mortgage payments stopped
- Slow demand for new houses
Hmmm. Good question.
Right now we are talking about Shanghai.
In the not so distant future we will be talking about Florida.
The difference is only a matter of time.
Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/
