China Vanke has rejected demands for refunds or compensation by customers who bought properties before it cut prices in late August, in a move analysts said could make potential buyers even more wary of the cooling real estate market.
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Vanke refuses property refunds in price row
Reuters in Shanghai
12 September 2008
China Vanke has rejected demands for refunds or compensation by customers who bought properties before it cut prices in late August, in a move analysts said could make potential buyers even more wary of the cooling real estate market.
The country’s biggest listed real estate developer has slashed prices by up to 20 per cent since late August for some residential complexes in Shanghai, Hangzhou and other cities as part of a sales promotion.
That angered recent buyers in those complexes, who have seen the value of their property fall even before moving in, and Vanke said in a statement on Friday that some have demanded their money back.
“While Vanke can understand buyers’ feelings, it is not possible to accept demands for compensation or refunds that are not based on law or contracts,” Vanke said in a statement.
“There is no possibility that this position will change in the future.”
The Shanghai Morning Post had reported earlier this week that Vanke was considering some sort of compensation in line with market conditions.
China’s real estate market has been faltering since late last year because of a slowing economy, ebbing speculative interest in high-end urban properties and a series of measures by government officials, who have fretted about a property bubble, to cool the once overheated market.
Vanke said on Tuesday that its sales plunged 35 per cent in August from a year earlier to 4.07 billion yuan (US$595 million) in August, while in terms of area they sank 33 per cent to 474,000 square metres.
The official Shanghai Securities News reported on Friday that a growing number of people who bought Vanke properties in Shanghai, Hangzhou and other cities were demanding refunds or compensation.
“I just bought a property two months ago and I have lost more than 100,000 yuan, equal to my savings for several years,” it quoted one buyer as saying.
Analysts said Vanke’s case is typical of the dilemma facing many mainland property developers: They need to cut prices to attract buyers, but by doing so, they risk angering customers who have already made purchases and may demand their money back.
“Although developers could reject such demands on legal grounds, they nevertheless would weaken overall investor sentiment in the property market,” said real estate sector analyst Zhou Jiong at Tianxiang Investment Consulting Co in Beijing.
“Vanke’s case is yet another clear sign that a period of correction is now certain in China’s property market this year, and is very likely to run into next year,” he said.
Vanke said on Friday that the response to its sales promotion since late August had been very favourable, with sales of 360 new residential units worth 616 million yuan as of Wednesday.
The news boosted its shares on the Shenzhen Stock Exchange, which were up 2.52 per cent at 5.69 yuan at midday, outperforming a 0.20 per cent rise in China’s benchmark Shanghai Composite Index.
But Vanke’s shares have lost more than two-thirds of their value since the end of last year, as investors focused on the poor outlook for Chinese property developers.
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