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China’s Housing Market Is Finally Cooling. Some Homeowners Are Furious

Thirty floors above the showroom of a Chinese developer, a 29-year-old woman stood on a small rooftop ledge, threatening to jump and declaring that her recent home purchase had ruined her life.

Ms. Hou, who asked to be identified by only her surname, was one in a group of angry home buyers who had gathered at a real estate sales office in Tianjin, a port city about an hour from Beijing, on Saturday, demanding their money back for half-constructed apartments that had now dropped in price.

In recent years, Chinese officials have tightened financing to developers and rules on lending for home buyers in an effort to cool a buying frenzy and runaway prices. The government has delivered a consistent message: Apartments are for living, not for speculation.

The Tianjin buyers’ anger was a sign the strategy was finally starting to work. Price increases across the country have slowed and at least in some large cities, prices have even dropped. Some of those who have pooled their life savings to become homeowners are now finding it wasn’t the sure-bet investment they thought.

At the sales center at Sunac China Holdings Ltd. in Tianjin, over the sound of upbeat electronic pop music, buyers crowded around a customer service representative demanding to know why the company had substantially lowered sales prices.

“You promised me the house price wouldn’t drop,” one woman yelled. “I am bankrupt because of this home.” Yu Xi, the customer-service representative, remained impassive, telling home buyers there was little he could do.

At a certain point, Ms. Hou lost patience and took the elevator up to the roof of an adjacent building. She climbed up on a ledge, perching herself about 8 feet above the rooftop itself. It was less dangerous than if she had threatened to jump down 30 floors to the ground, but police officers and other home buyers tried to coax her to climb down or at least sit. She refused to move until she could speak with the company manager.

“You’re forcing me to die,” Ms. Hou told the crowd, which included a Wall Street Journal reporter, as she stared off into the distance, her phone in her left hand.

The previous weekend, a protest erupted outside the developer’s showroom, one of several over falling home prices in recent weeks. On Saturday, a dozen police officers patrolled the parking lot. Sunac declined to comment.

In Tianjin, average existing-home prices have fallen for three consecutive months in a month-over-month basis, according to estimates by Shanghai-based research firm E-House China R&D Institute. Prices in Beijing and other large cities, such as Guangzhou in the south, have dropped. In China as a whole, home prices are still rising but at a much slower pace.

In recent years, cities like Tianjin, with lower living costs and less restrictive residency rules, have attracted many young home buyers. Ms. Hou told The Wall Street Journal that she and her husband were moving there from the adjacent Hebei province to give their 4-year-old child better education opportunities, and had bought the Sunac apartment at a price of 1.5 million yuan, or $213,000. They needed a 60% down payment which they met by using around 100,000 yuan in savings and cobbling together the rest from relatives and online lending services.

The purchase stretched the couple to their limits financially. Together, they make around 8,000 yuan ($1,137) a month. “I need to pay 3,700 yuan for the mortgage, not to mention the money I borrowed from my relatives, ” said Ms. Hou, who works in sales at a company making work clothes. There is also the debt to the lending services, and she has taken several part-time jobs. “I can barely breathe,” she said.

The government’s attempts to stop speculative property-buying long fell on deaf ears in a country used to steady price rises, and where wealth accumulation has come overwhelmingly from real-estate gains. In China, “housing is a financial product,” said Zhang Dawei, an analyst based in Beijing for Hong Kong-based property agency Centaline. “The more prices rise, the more demand you get.”

It is far too early to say whether the property market as a whole has peaked. An official survey of average home prices in 70 Chinese cities showed existing-home prices rising 4.6% in September compared with a year earlier, a healthy rate though lower than August’s 5.3% year-over-year gain.

Nonetheless, Sun Yue, a real-estate agent at Beijing-based Century 21 Global, says that some Beijing homeowners have slashed their asking prices by 10% or more to attract buyers. Mr. Sun expects prices to fall for another several months, but to then start rising again.

Chinese leaders want prices to stabilize, not rising too much but also not to fall too quickly. At a Politburo meeting in July, policy makers pledged not to ease property controls for fear of driving up speculation and household debt. Instead, they have hoped the existing restrictions would slowly restore calm in the market.

Faced with cooling home prices and the prospect of social instability, some regional governments, including Nanjing and Tianjin, have moved to tweak restrictions in hopes of boosting the market again. Local governments have their own incentives to prop up the property market, since many have leaned heavily on land sales to meet economic-growth targets.

In Tianjin, some of the angry home buyers sought help from local authorities, but said they were told the price drop was “free-market behavior.” They said Sunac offered them only unsatisfactory remedies, including discounts on parking spots or to pay a steep fine to reverse their purchases.

After a few hours, Ms. Hou was pulled off the ledge by police officers. Unwilling to go home empty-handed, she pulled a comforter and slippers out of her car to spend the night in the sales center.
Source: Dow Jones

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