[photopress:apartments.JPG,full,alignright]If you are building a block of apartments before you clear the land you stick up a billboard with an artist’s impression — an optimistic artist’s impression — of the finished building and the interior of apartments (why are all the inhabitants always young and slender?) to solicit bids for slices of the developer’s dream. If you order and plonk down your money this makes the developer much happier as the investment starts to be paid for before even a hole is dug.
Now, according to the South China Morning Post, China is considering a ban on residential property pre-selling in a bid to force out speculators and hold down price growth. In fact this is among the recommendations made by a study group within the state planning agency, the National Development and Reform Commission.
The report said developers and property consultants are warning against such a ban as it would reduce supply. And are using what might be called the ‘reverse gotcha’ argument to support their case.
Alan Chiang, the head of DTZ’s residential department in the mainland, said, ‘Disallowing pre-sale of unfinished flats will cut flat supply in the market, and that will only result in prices going up because demand remains strong.’
The measure is still a proposal but the central government is sending a clear signal to the market by outlining its plans.
Key cities such as Beijing, Shanghai and Shenzhen allow developers to seek pre-sale approval when buildings of eight floors or above are 60% complete.
The state planning agency said any such ban will be trialled in certain first and second-tier cities where real estate price growth has been particularly strong.
Other proposals include assessing a differential tax rate for on sales of multiple properties, and implementing various fiscal disincentives on luxury flats.
The story is given that developers use pre-selling to lessen their risks in high-rise construction, gaining access to funds that will help ensure that the building is completed.
This seems a very leaky argument. No doubt it will be considered by the appropriate government body.
Sources: Forbes and Forextv
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