Developers feel the heat from unhappy buyers

HONG KONG: Mainland property developers are now more concerned about policy changes and mounting resentment among buyers over prices, than finding buyers for their apartments.

"Developers are less worried about money now," said Jeffrey Lin, chief financial officer of Longfor Properties. "They know they can sell their units. It is just a matter of whether they get more or less because of the current austerity measures to damp down the red-hot market."

Housing had become a political issue, said Lin, which had led the central government to take action to curb prices amid growing public resentment against home prices that had risen to levels that many could no longer afford.

"People are unhappy with developers as they are one of the parties benefitting from the rising home prices," he said.

In response to this mounting tide of resentment, the Chongqing-based developer had decided to contribute to society by offering 2,000 small-sized flats in the city for lease to university students and city residents, who do not have their own flats, within the next five years.

Rentals would be comparable to those paid for subsidised public housing and the flats would eventually be offered for sale after five to seven years.

"This is what we should do. At the same time, the project can lower political risk. Such a positive impact is much greater than a five-year rental loss," Lin said.

Ongoing austerity measures had delivered a message that the central government was serious about reining in runaway property price rises and this would prompt speculators to quit the market, ensuring a healthier development, Lin said.

Beijing imposed its latest round of measures a week ago, with the State Council raising mortgage rates on second homes to 1.1 times the central bank's benchmark lending rate, up from the current 80 per cent.

Buyers purchasing second homes must also now pay at least a 50 per cent deposit, up from 40 per cent; no mortgage lending will be provided for third-home purchases; and there is a minimum 30 per cent down payment on first homes bigger than 90 square metres. The measures were announced after home prices in 70 cities jumped a record 11.7 per cent year on year last month.

Lin said both transaction volumes and values surged last month after a slowdown in the first two months of this year.

He was confident that although prices might fall by between 15 to 20 per cent and hit a bottom in the third or fourth quarter of this year as an immediate reaction to the measures, the trend of rising home prices would not reverse over the long term.

"Real demand will come back when the public's unhappy sentiment has been eased after the price adjustments," he said, and then local governments would begin to relax some of the policy measures.

In the meantime Longfor would not slow its expansion plans. It had projects in the pipeline that may attract investor interest, Lin said. -- South China Morning Post

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