Under the front page headlines of Guarding the global economy’s biggest risk, the Weekend Australian Financial Review provides us a chilling insight to the cracks emerging in China’s unprecedented property bubble.
The Financial Review’s Angus Grigg writes
Security guards, wearing army green, provide the first hint of trouble. An even dozen of them line the stairs leading to a sales office on the fringes of this coastal city in eastern China. It’s a tunnel of camouflage, which prospective property buyers must pass through before entering the main building. And that’s just the outside security detail.
Inside, a further 31 uniformed guards stand stiffly around the perimeter, while 10 bulky men in plain clothes occupy all the available chairs. It’s hardly the ideal environment to buy an apartment in the 23-tower development under construction next door.
In a desperate move to offload properties, developers have been slashing 30 per cent off sale prices – overnight.
This has created a raft of buyers who have lost all their life savings and are now underwater, even though their apartments won’t be complete for another 18 months. Many are starting to protest in the streets, and this has lead New Century to bring in security guards by the bus load.
Negative equity, usually associated with Ireland or Florida, is a phenomena almost never seen in the 30-year history of private property ownership in China. Guan and the 700 other buyers in the “Noble Garden” development are in this situation because New Century began slashing prices on March 21, in a bid to clear excess stock.
While the developer refused to talk to the Australian Financial Review, buyers speculate New Century, like a growing number of developers are going bad and need liquidity quick smart.
You can read the entire story here:
» Guarding the global economy’s biggest risk – The Australian Financial Review, 5th April 2014.