SHANGHAI (AP) — Property owners in Shanghai and other big Chinese cities are protesting as measures to cool the once-overheated real estate market prompt developers to slash prices.
The trend suggests authorities are making progress with a yearslong effort to cool prices that had surged beyond affordable levels for many families. But some worry the market could collapse — angering many middle class owners who put their savings into property, expecting prices only to rise.
Upset home buyers gathered outside a developers' sales office in downtown Shanghai over the weekend demanding refunds after learning of the discounts now being offered, said Tang Minzhi, a spokeswoman for China Overseas Property (Group).
Protesters also besieged offices of at least two other property developers in the city's eastern suburbs, some holding up signs demanding refunds.
State media on Tuesday reported similar gatherings in other cities as property companies have begun trying to trim inventories of unsold homes by offering discounts of up to 40 percent from recent prices.
Seeing later buyers get steep discounts has galled many who bought earlier but have not yet moved in, since many apartments are sold before they are built.
The government has raised interest rates and bank reserve requirements repeatedly to discourage excess lending by banks to property developers and help cool prices, especially in big cities like Shanghai.
Some cities have also hiked the amount of money needed for down payments and restricted families' purchases of second and third properties.
Until recently, prices had continued to rise, though the increases leveled off in recent months, while sales weakened. Tight curbs on bank lending are also beginning to make it more difficult for buyers to obtain mortgages.
The protests over falling prices highlight the dilemma the authorities face in balancing the need to deliver rising living standards to average families while also protecting the interests of affluent and middle class families — and many local governments and state-owned corporations that also are heavily invested in the property sector.
As property sales fell 15 percent in the third quarter, many developers that in the past hoarded property in hopes of seeing prices rise further are now under financial pressure.
Market leaders like China Vanke are still reporting robust earnings growth. Vanke's net profit climbed 32 percent in July-September while sales in the first nine months of the year jumped 31 percent.
But a growing number of other developers are grappling with rising debt levels and shrinking liquidity.
The problem is worst in the biggest cities, the earliest to be affected by the property boom and the most severely affected by tightening measures. Smaller cities in the provinces are still booming thanks to a gradual shift of investment inland from the coastal areas, says Xue Jianxiong, an analyst at China Real Estate Information Corp.
"There will be an even more serious correction in the future, when the smaller cities see growth weaken due to the impact of the debt crisis on exports," Xue said.
"There could be a drop of up to 50 percent then," he said.
The huge demand in China for improved and new housing will likely support prices in the long-term, analysts say. Limited by restrictions on where they can stash their savings, investors have tended to favor property given the low deposit rates paid by the banks, the weak stock market and the absence of a property tax.
But short-term corrections are inevitable, and a serious one could eventually deal a severe blow to the economy, Wang Tao, an economist for UBS, said in a research note Tuesday.
"Such a property-led hard landing scenario is quite likely in the next few years, even though we do not think the property market is about to collapse now," she said.
To help meet demand for more affordable housing, Beijing is pushing local governments to build more low-cost apartments. A recent push to meet targets for such housing has supported construction and investment despite weakening demand for more expensive commercial property.
Associated Press researcher Fu Ting contributed.