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October 13, 2011

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Recent home buyers demand relief after prices discounted

NEARLY 100 angry homeowners from Taicang City have been protesting at a property developer's Shanghai office since Tuesday, seeking refunds or purchase cancellations after the company cut prices by more than 20 percent during recent promotions.

Jingrui Properties Group, a Shanghai-based company that has built a residential project in nearby Taicang City, aroused dissent by cutting home prices that had averaged 8,000 yuan per square meter to a range of 5,000 to 7,000 yuan to boost sales since late September.

"I bought a home for nearly 1.1 million yuan (US$172,700) in June, but a similar home costs only 850,000 yuan now," said a homeowner surnamed Wu. "We can't accept this."

Jingrui said the discount was inevitable because a newly completed project nearby is starting to offer homes at 1,000 yuan per square meter cheaper than Jingrui's original price. But the company rejected home buyers' request for compensation.

Analysts said property developers are facing tight liquidity amid poor sales under China's strict control measures on the property market, but they are usually cautious about offering discounts.

"It seemed no surprise to me that Jingrui's recent price cuts have aroused such wrath among the project's owners as they simply lost between 20 and 25 percent of their money within just a few months," said Sky Xue, an analyst with China Real Estate Information Corporation.

"As far as I know, some developers are now adopting some rather 'tricky' marketing strategies to boost their sales as buying sentiment still remains very sluggish."

For instance, two residential projects in the city's northern Baoshan District are now offering quite notable cuts for their lower floor units while still keeping high price tags for the upper floor units, which has proved useful to trigger sales but at the same time has avoided upsetting current owners, Xue said.

While market sentiment continues to be slack as austerity measures remain in force, only a small number of developers are offering significant promotions to buyers, with most of the price cuts being confined to single digits, people in the industry said.

Standard & Poor's said in a recent report that more than half of China's major developers will be unable to meet debt payments and will have to cut prices if home transaction volume falls 30 percent or more in 2012 from this year.


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