Developer perils in China

Bursting of bubble hits Chinese middle class | theage.com.au

The Age has an interesting article today on the downturn in the real estate boom in China. There are bargains to be had in new apartments, at least compared to a year or so ago, and things may well get worse.

The most fascinating part of the story is this:

Buyers in the West are familiar with the property market tides that alternate between spreading wealth and financial misery. Western courts tend to dismiss the claims of real estate agents as "mere puffery". But in China, where the concept of private home ownership is scarcely a decade old, those who bought near the top tend to believe they have been robbed. The first buyers to notice their wealth diminishing were those who bought unfinished apartments and watched neighbouring units being sold for much less. They are banding together to accost developers, air their grievances in the media and take their problems to court.

"Don't buy Zhonghai houses, the value will fall fast," chanted a crowd last weekend at a Zhonghai development in eastern Beijing. A Zhonghai manager, Ouyang Guoxin, negotiated the crowd's silence by promising to buy back the apartments at original contract prices during the week, which he never did. On Tuesday the crowd raided the group's offices in West Beijing and disconnected the receptionist's computer.

And as for the legal system: well, it isn't helping. (Mind you, not that it should, in this particular case, but still it could be better handled than this):

Shanghai lawyer Du Yueping says he has received inquiries from disgruntled investors in most major Chinese cities, including 400 in the coastal city of Xiamen. "They're all asking me the same question, how they get their money back," he says.

Each working day since September 23, Mr Du has tried to file a writ in Shanghai's Pudong District Court. Each time, the judge has refused to accept the paper work, citing orders from above.