How Property Developers Use Gold To Sell Property In China
- September 3, 2023
- 4 min read
Get a gold bar with your property purchase in China
Imagine you’re in China right now, where the real estate bubble just popped. A bunch of companies have gone under, and the government is pretty nervous. They’re afraid that if home prices drop too much, even more companies will go bankrupt, making the economic situation worse. So they’ve set a minimum price for new houses to try and stabilise things.
But you know how the law of supply and demand works – you can’t really change that. So, construction companies are getting creative. They’re pulling out all the stops to make buying a new home attractive, just to get people interested in buying again.
This has been done previously to attract more buyers (remember Normanton Park gave away 10 Mercedes-Benz cars to kickstart its delayed launch), although the gold bars are a separate thing altogether.
Along with this came a deluge of suspicious people, who immediately began testing the gold to see if it was real or just tungsten. There were also complaints by people who never received the promised gold, to which there’s relatively little recourse. This is a risk you run with gimmicky deals, which in some cases are meant to circumvent regulations: you don’t know if the developer will live up to their promise.
So if you’re ever promised grey-area “cashback” deals – like $50,000 “furnishing vouchers” – or discounts to help someone meet their quota, think it through carefully. It may end up being a (metaphorical) gold bar that stays undelivered.
We’re told the gold scheme has since ended though, but with a few dissatisfied buyers. I would be. Do you know how annoying it would be to pay my condo maintenance with gold bars?
Meanwhile, owners of 35 Gilstead aren’t going to be happy about the contractor.
MOM has issued a stop-work order for the construction site, because they found staircases with no handrails, open lift shafts without barriers, and a lack of guard rails. Work will probably resume only when this is all corrected, and the place looks more like a professional construction site than one of the more lethal Super Mario levels.
Don’t disregard the impact this has on the developer, as well as the owners. The most obvious problem is that owner-occupiers may end up moving in later. This is a huge pain if they’re currently renting, or are paying through the nose to store their furniture (in case you’ve never had to do this, typical storage costs are $3 to $4 psf per month, before factoring administrative costs and insurance).
The other problem is for landlords, who see their cash circling the proverbial drain. Every month’s delay is a month without rental income.
Then there’s the murky realm of the supernatural. Taboos are very real to some home buyers; and I’ve met one who said he’d sell as soon as possible, if a worker dies or has an accident on the site – even if it meant paying the 12 per cent SSD.
So all in, I’d say BCA’s idea to have bandings/ratings for builders, and not just developers, was a good move.
If it’s a pain to the buyers, it can be even worse for the developer
Case in point, Normanton Park, which we discussed here. There was a no-sale license that prevented them from selling, until after the authorities were satisfied; a risky delay given the five-year time limit.
One could argue that safety lapses were more the fault of the contractor than the developer; but that’s immaterial. These issues can end up affecting the developer as well, and impacting the sales of future projects.
This is especially hazardous in the current environment, when costs are high and developers need to form consortiums. No one wants to team up with a firm that’s had run-ins with the government, and this is going to prompt extra caution going forward. This may be an unintended positive effect, in this pricey environment.
Meanwhile in other serious property news…
- DBSS flats may have many million-dollar units; but is it just about location rather than better quality? Some buyers tell us their experiences.
- We need more clarity on the value of freehold condos. Here are a few things to consider, before you decide you absolutely must avoid leasehold.
- Property valuation may have too much going on that’s opaque and arbitrary; and it might corner you into taking a pricier home loan as well.
- 5-room flats near MRT stations, and below $550,000? They do exist, and we found some.
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