China developers offer lower down payments

Global Business

China developers offer lower down payments

Home buyers in China are now being offered lower – and even zero – down payments. The deals are appearing despite China’s minimum down payment requirement of 30 percent for first-time buyers.
Official data shows property sales slumped 47 percent year-on-year in May, putting developers under pressure. From Beijing, Grace Brown reports. To further discuss we are joined by Ann Lee , adjunct professor of economics and finance at New York University, and author of “What the U.S. Can Learn from China”

China developers offer lower down payments

China developers offer lower down payments

Home buyers in China are now being offered lower - and even zero - down payments. The deals are appearing despite China's minimum down payment requirement of 30 percent for first-time buyers. Official data shows property sales slumped 47 percent year-on-year in May, putting developers under pressure. From Beijing, Grace Brown reports.

In south Beijing, crowds of residents arrive to tour a new property and, possibly, buy a new home. Behind a gleaming, gold unicorn, “Season Joy City” has an offer almost too good to be true.

Chen Wenjun, Deputy Manager of Pearl River Real Estate Dev’t. Co.: “Usually, buyers must pay a deposit of up to fifty percent. But we are letting customers pay just ten percent. Six months later, they pay the rest of the deposit.”

The developer also says it’s helping buyers get loans, from real estate brokerage, SouFun. Zhou Jianjun, who works in advertising has just signed, with his girlfriend. Zhou Jianjun, home buyer: “We don’t have much savings, so the ten percent installment policy really helped us.”

In just 30 minutes, 160 apartments sold out but legally, it’s a grey area. Grace Brown from Beijing reports: “In the first five months of this year, home sales by value fell more than 10 percent. As a result, more developers like this one are testing the boundaries of the official down payment rule.”

Lower down payments are appearing across China. But experts say it’s unlikely to last. Professor Huo Deming, Ph.D. from Peking University: “The zero-money down trend is not going to last forever. I believe after 6 months or 12 months, we won’t hear about it anymore, because the developers will run out of money. No developer can sustain such a long-term loan to customers, unless they have banks as backup”. In America, too-easy home loans caused a sub prime mortgage crisis. Which led to a financial crisis, but Professor Huo insists, that’s unlikely in China. Professor Huo Deming, Ph.D. from Peking University: “We need to look into whether the banks that are heavily involved in the real estate sector – are in trouble. But in China most banks are government-owned. They’re never in danger.

In a closed-door meeting last month, the country’s financial regulator said banks should ban developers from giving zero-down payments, or loans. But with pressure to maintain growth of seven and a half percent and property accounting for 14 percent of China’s GDP, it’s unclear if local governments will listen.

Grace Brown from CCTV Beijing reports.

According to the Wall Street Journal , Economists at UBS, Standard Chartered and Nomura say the real estate sector is the biggest risk to China’s economy, which has slowed significantly from the double-digit growth rates of a decade ago . To further discuss we are joined by Ann Lee , adjunct professor of economics and finance at New York University, and author of “What the U.S. Can Learn from China”

Guest Speaker Ann Lee on Global Housing Markets

Guest Speaker Ann Lee on Global Housing Markets

According to the Wall Street Journal , Economists at UBS, Standard Chartered and Nomura say the real estate sector is the biggest risk to China's economy, which has slowed significantly from the double-digit growth rates of a decade ago . To further discuss we are joined by Ann Lee , adjunct professor of economics and finance at New York University, and author of "What the U.S. Can Learn from China"