The bureaucrats running the city of Hangzhou in eastern China have reached back into their command-economy toolkits for a solution to rapidly decaying housing prices – make discounts subject to government approval.
The Hangzhou government announced on Wednesday that real estate developers wanting to lower the prices on new homes have to first notify government agencies.
The city, which is the capital of Zhejiang province, saw housing prices drop 11.3 percent in the first quarter of this year compared to the same period last year, and sales volumes fell by 37.8 percent, according to official government statistics.
The inventory of unsold homes has also shot up by 36.2 percent, to stand at 76,004 available units on the market at the end of March, making Hangzhou’s situation look even more like a real estate bubble.
Discounts and Riots in Zhejiang
Hangzhou was one of the first communities in China to report discounts on housing this year, after many cities recorded record growth in housing prices last year. And many nearby cities in Zhejiang are reporting similar declines in the market.
While the declines themselves may not be a major concern to the government, the ability of falling prices to spark riots among existing homeowners, appears to be the force behind Hangzhou’s latest attempt to control the market.
Late last month the authorities in Taizhou, about 270 kilometres (171 miles) from Hangzhou in Zhejiang had to call in the SWAT team to calm a discount-driven protest.
The local uprising was sparked by a developer introducing a 30 percent discount on new homes in order to boost sales. The price reduction plan raised a ruckus when earlier buyers marched on the developers offices to demand refunds on their purchases.