Winter comes early for mainland property developers

Gone are the good old days of the so-called “Golden September and Silver October” for Chinese property developers.

For the traditional harvest season that sees a surge in property sales has yet to happen in China this year.

Worse, instead of being crowded with people queuing up to buy properties, developers’ sales offices across China are being besieged by protesters.

Angry buyers swamped marketing offices of mainland property giants Country Garden, China Evergrande and Vanke, demanding refunds after developers slashed prices substantially during this month’s golden week holiday.

Xinzhou Mansion, a Country Garden residential project in Shangrao, was mobbed last Thursday with protesters throwing rocks after the developer cut prices by 30% to 700 yuan (US$101) per square f00t. Banners appeared accusing the developer of being unscrupulous.

Country Garden said discounts being offered were only for second-time home buyers, stressing that fluctuations in of the prices of commodities were normal, and that the company and its buyers will complete transactions based on the spirit of contracts signed.

At Hefei, Tahoe Group found no way but to repay property buyers after it cut prices by 26% from 1,900 yuan per square foot to 1,400 per square foot.

The Anhui project was a sold out last year after the developer invited movie star Zhang Ziyi to the promotion. Original buyers were furious when the falling market price of their properties caused their net worth to plunge.

A group of buyers gathered to force the developers to either compensate them for the price difference, give them free car parking spaces, or grant them full refunds.

In Xiamen, it was reported that the price of a 3,000 square-foot villa developed by Vanke was slashed by 40% to 2.78 million yuan, down from its original price of 5 million yuan (US$722,146).

At the moment, it is unclear whether the recent property price cuts are a temporary phenomenon or if they signal an oncoming nationwide correction. If it is the latter case, Chinese banks may be the next to suffer as many of their mortgage assets could turn sour if mortgage owners who bought at the top of the market find themselves in a state of negative equity.