Property speculators in Wenzhou hit by plummeting prices

Property speculators in Wenzhou hit by plummeting prices

Staff Reporter

2014-02-14

The resale market for housing in Wenzhou was badly hit following the government’s second round of cooling measures announced in September 2010, with the city having posted the country’s sharpest decline in prices after recording the highest appreciation, state broadcaster China Central Television (CCTV) reports.

A real estate agent in Wenzhou told CCTV that the number of housing transactions has dropped 50% to 60% to only five to six deals being closed every month, and the impact this year has been harsher than the sector expected.

Signs pointing to fire sales, have been seen at every property agency in the city.

One realtor said that during the “good old days” between 2009 and 2011, houses were flipped from one agency to another, and their prices would double in a month in the process.

Chen Hong, a senior researcher at Wenzhou University’s real estate institute, told CCTV that heated market speculation has led to low occupancy rates in residential projects.

While people investing in the market before 2011 had earned great profits, Chen noted that the government’s cooling measures in 2010 and local authorities’ subsequent introduction of purchase restrictions led to 29 months of price declines in Wenzhou.

Another agent said that a house, which could be sold for 40,000-50,000 yuan (US$6,595-$8,244) per square meter before, is now worth only 22,000-23,000 yuan (US$3,628-$3,793) per square meter.

Fire sales were rare in 2010 and only took place when an owner had an urgent need for funds. However, they have now become the norm in the city, CCTV said.

Yan Jiahua, president of marketing at Zhongliang Real Estate Group, pointed out that the ratio of transactions for second-hand houses to new houses has dropped from 5.7 in 2010 to 1.4 in 2013.

Realtor Jiang Yi added that Wenzhou is gradually becoming a buyer’s market and that housing owners hold less and less power in price negotiations.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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