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Homebuyers seek to overturn previous contracts

By Hu Yuanyuan (China Daily)
Updated: 2008-07-02 15:12

Lin Zhi, a 30-year-old lawyer feels on the thorns these days. The apartment he bought at the end of last year, located outside Beijing's east fifth ring road, has shrunk by nearly 200,000 yuan so far, dropping from 12,000 yuan per sq m to 9,800 yuan per sq m.

"Since I've signed the contract and paid the installment, asking for a refund can't hold water on law," Lin said. As a lawyer, he understands this point clearly, but psychologically he can hardly accept the fact that his one-year hard work was in vain because of his new apartment.

"The feasible way now is to argue with the property developer for more favorable terms on other charges," Lin said.

One of his colleagues, Li Xiang, may be a bit luckier, as he only lost 30,000 yuan for his decision to change. "Given such a sluggish market, I would rather take a wait-and-see attitude now."

Lin Zhi and Li Xiang are never alone. The continuous shrinking property transaction and dropping price prompt more people to hesitate and even withdraw their decision to buy properties.

Industry statistics show that the proportion of sold floor area to finished floor area in Beijing, Shenzhen, Guangzhou and Nanjing has dropped to below 0.7, putting more pressure on the property price.

Some customers' eager to get refunds, however, are mostly in the mid-end apartments range which are in poor locations. For high-end apartments or villas, the price remained comparatively firm.

"The declining supply of large-sized apartments with low plot ration in urban areas largely squeeze the room for price drop," said Zheng Deqiang, marketing manager of Beijing Runfeng Real Estate.

In early June, Beijing municipal commission of urban planning launched a new standard on the urban landing used for construction, limiting the average floor area of each apartment to no more than 100 sq m,

Zheng said enquires about their project jumped by nearly 30 percent after the release of the new standard. The company's project is located near the capital's east fourth ring road and boasts a plot ratio of a mere 2.0 percent, in contrast with 3.0 percent for nearby residential buildings.

"Customers would only like to return apartments with poor price value proposition," said Jason Leow, deputy CEO of CapitaLand (China) Investment Co Ltd.

According to Leow, China's property market is now seeing a big shift from investment-orientated buying to self-use buying, thus requiring real estate firms to pay much more attention to their product's quality and services.

"In such a market with a wait-and-see atmosphere, we would be more critical about the location and quality of our products," Leow added.

CapitaLand planed to launch three residential projects in Beijing this year, but all in the capital's very urban areas such as in Chaonei in the east second ring road and Madian along the north third ring road.

Coastal Real Estate Investment (China) Ltd, on the other hand, is striving to improve its service to customers by introducing the industry's first calling system.

Though calling centers have been widely used in the banking and telecom sector, they are resisted by most property developers as housing is a nonstandard product and complaints could vary.

"The system could largely improve the efficiency of settling customers' complaints, and offer a more value-added service to our customers," said Cheng Shi, vice-president of Coastal Real Estate.