As Wenzhou House Prices Plunge, Owners Abandon Mortgages
News from the China says house prices in Wenzhou City,
Zhejiang Province, continue to drop,
with some real estate properties dropping more than 50%,
making many owners feel compelled to stop paying mortgage,
abandon the properties and run away.
The Wenzhou City Banking Bureau confirmed this phenomenon.
Local people also say this phenomenon is very serious.
Experts say that it’s a signal of China’s real estate crisis,
and that its expansion will lead the real estate bubble to burst
and maybe even a full-blown financial crisis.
The realty market crash and foreclosures in Wenzhou City,
Zhenjiang Province, has frequently been in Chinese media lately.
Since August this year, some 15,000 units
have been said to go into foreclosure.
The Wenzhou Banking Bureau says that the actual number
is only 595 units, and that the overall risk is controllable.
However, this statement was refuted by people in Wenzhou.
Wenzhou resident Cheng Zongyao:"Housing prices here
have been on the decline, as no one wants these units.
At least 10,000 units have been foreclosed.
It couldn’t have been only 500.
But the government is still manipulating the market,
developers are still operating and advertising a good market.
Actually, it is not optimistic at all.
The houses are simply unwanted."
Analysts say the continued slump in Wenzhou’s real estate
leads to negative assets for those who bought high priced houses.
The money they owe the banks is much higher than
the market prices of the houses.
So many people have been forced into foreclosure.
Chen Zongyao:"These home owners abandoned the properties.
They gave it back to the bank and abandon the house.
They’d rather lose the money they paid before."
A sample from the China Index Academy’s survey in Wenzhou
shows that from January to August of 2012,
the average of property prices in Wenzhou dropped by 25.9%
from 20,000 yuan per square meter to 15,000 per square meter.
Some properties even fell by 50%.
Facing falling home prices and a large amount of foreclosures,
Wenzhou government released a purchase restriction policy,
allowing local residents to buy only two houses.
This move goes opposite to China’s price control policy.
It has been implemented more than a month, and no one yet
has called for it to stop.
Apparently it has been approved by the central government.
Chen Zongyao:"The government might not want prices to fall,
in fear of turmoil.
Developers and the government can only keep the prices stable.
China’s GDP depends on real estate, land occupation and
forced demolition, so they have to bolster the price."
However, the government’s restriction on purchases
did not have the expected results.
Wenzhou’s house prices continue to decline.
Although China’s National Bureau of Statistics emphasizes
that Wenzhou is the only one in the top 70 Chinese cities
with falling house prices, experts say this statement is not true.
Financial analyst Ren Zhongdao:"Chinese scholars and
overseas media report that China has many
second-level and third-level empty cities or ＇ghost cities.＇
Hundreds of cities are like that.
It is not an issue of individual cities. It is a common issue.
It is a signal that more such crises will occur."
According to Chinese Communist Party (CCP) mouthpiece
CCTV’s Economic Half-Hour,
a similar wave of foreclosures also happened in Shenzhen.
Chen Zongyao: “It has happened in many places across China.
Some of my family and friends are also facing this issue.
They bought houses for investment,
but no one wants to buy from them now.
This phenomenon is impacting the whole country,
not only Wenzhou."
Currently experts predict that declining house prices
and foreclosures could gradually sweep across China,
causing a financial storm.
In September, Wang Shi, chairman of Vanke, warned people
three times via his Weibo, about the potential housing bubble.
It can be seen that China’s real estate situation
is already at very dangerous point.
NTD report Zhang Tianyu