The sudden downturn in China’s property market is bad news for many global companies, but luxury German carmakers stand to benefit, at least in one city.
In Wenzhou, where house prices have fallen sharply, a real estate developer said that from Wednesday it would throw in the keys to a BMW with each apartment at a new residential complex for the first 150 buyers.
More
On this story
- China factories eye cheaper labour overseas
- China imposes curbs on buying property
- Opinion China needs a long-term solution to its property woes
- FT series China shapes the world
- Lex China property
On this topic
The deal is a sign of the desperation felt by developers in China’s once-booming property market, which has been pounded by government measures aimed at heading off a bubble. The slowdown is a matter of international concern, with Chinese house construction driving demand for commodities and propping up growth in the sputtering global economy.
Chinese developers have been reluctant to cut prices as transactions have slowed this year, but some are finally capitulating after dreadful sales in October. Others, afraid of the stigma of slashing prices, are offering giveaways such as extra garden plots, Louis Vuitton handbags, cruise vacations and now cars.
“Whoever signs a contract and makes the downpayment will be able to drive away in a BMW,” said the sales assistant at Central Mansions, a cluster of brown towers with 868 apartments that have just come on to the Wenzhou market.
“No, it doesn’t mean that sales are bad. It’s just that we’re trying to attract customers,” she said.
Home to legions of entrepreneurs and speculators, Wenzhou’s economy soared when China was flush with cash. But it has been hit harder than most cities by the government’s shift to a much tighter monetary policy to control inflation, as well as the property clampdown.
Wenzhou’s housing sector is now the weakest in the country, with prices falling 1.4 per cent in September month on month. Its smaller firms have suffered from a lack of bank credit, triggering dozens of bankruptcies and prompting the government to
But while Wenzhou is an extreme case of the stress in China’s property market, it is certainly not alone. Housing prices have started to fall nationwide, according to the China Real Estate Index System.
That has been tough to digest for many Chinese who had come to believe that house values could only rise. When several developers in Shanghai cut their asking prices last month, homeowners protested, ransacking showrooms and demanding refunds.
Fearing similar fallout, many developers are trying to entice buyers with special deals instead of discounts. The BMWs in Wenzhou cost Rmb300,000 locally, equivalent to about 10 per cent of the price for an apartment, the sales assistant said.
Xiaoyunli No. 8, a development in Beijing that has sent workers to leaflet cars at busy intersections, said there would be no discount and no car for buyers.
“But you’ll get a deal and it will be no problem for it to amount to the tens of thousands. It will be like giving you a car,” the receptionist said.
9.11.11
Chinese property buyers get BMW thrown in
8.3.11
There's A 60% Chance Of A Chinese Banking Crisis By 2013 - Fitch Ratings
China's financial system have been classified as MPI3 since last June. That means there's a 60% chance of a banking crisis by mid-2013, according to comments today from Fitch Ratings senior director Richard Fox to Bloomberg.
Historically an MPI3 classification suggests that crisis will occur within three years, as it did in Ireland and Iceland.
China's vulnerability is related to out of control real estate lending. Fox tells Bloomberg:
Fitch sees the risk of “holes in bank balance sheets” should a property bubble burst...
Chinese banks fueled record property-price gains by extending a record 17.5 trillion yuan ($2.7 trillion) of loans over 2009 and 2010 under the stimulus program that propelled the nation through the financial crisis. Regulators’ efforts to contain the risks for lenders have included stress tests for declines in house prices and a crackdown on lending to local- government financing vehicles.
Don't Miss: Amazing Satellite Pictures Of Chinese Ghost Cities
29.1.11
China the Mother of All Grey Swans / Japan Past the Point of No Return - October 2010 - By Vitaliy Katsenelson
Is China on the verge of imploding? Is the excess and idle capacity going to drag the entire country under, and with it the rest of the world?
Many very interesting points raised in this presentation from Vitaliy N. Katsenelson of Investment Management Associates.