During China’s golden week, buyers of Country Garden homes mobbed the company’s sales centres in several cities after the country’s largest developer by sales began offering discounts that made new homes cheaper than the price paid by earlier customers.
The activist consumers became enraged after Country Garden had reduced home prices at some projects by as much as 30 percent compared to one year ago. Some customers storming the developer’s offices in Shanghai and in rural Jiangxi provinces, carried banners bearing slogans such as “Give back my hard-earned money” while others delivered their sentiments via rocks and bricks aimed the company’s sales offices.
Consumer unrest over perceived discounts at Country Garden come after the developer’s competitor, China Vanke, told team members at its autumn meeting that the company’s slogan for the season is “survival,” as mainland authorities step up restrictions on home sales and sales volumes slump.
Buyers Respond to Country Garden Discounts
The Jiangxi province city of Shangrao was the site of one of the biggest outbursts by Country Garden homebuyers after the company’s Xinzhou Mension project had cut its prices from RMB 10,000 ($1,145) per square metre to a reported RMB 7,000 per square metre.
For a city where monthly salaries averaged RMB 4,930 in 2017, the discount means early buyers of 100 square metre homes in the project may have wasted over five years salary. According to videos and pictures posted on Chinese social media, the sales centre of Xinzhou Mension was surrounded by unhappy buyers hurling projectiles at the building while seeking to get their money back.
Similar cases took place in Shanghai, where a Country Garden project in Pudong District reduced the unit price from RMB 35,000 per square metre at the end of September to RMB 28,000 per square metre — slashing values by as much as 20 percent in a week.
Mainland media outlet The Paper cited a Country Garden employee as saying that in Shanghai, the discount cases only applied to units that were unpopular with buyers due to locations on lower floors or at the outskirts of the development.
Another source explained that price reductions were only on unfinished units while conventional pricing still applied to the sales of standard, semi-finished rooms. However, earlier homebuyers still refused to accept the explanations and accused Country Garden of unfair market practices.
Apart from discounts, Country Garden also has reduced the down payment requirements for some of its properties in third-tier cities, where the developer builds the majority of its projects, to accelerate sales. Several projects in third and fourth tier cities are being promoted as requiring “only 10 percent down payment for your purchase”, a step which further displeased earlier buyers who had committed 30 percent down payments.
Fall Season Disappoints for Developers
An adage about the buying season for homes in China, “gold nine silver ten” had traditionally described the period around the country’s Mid-Autumn Festival and National Day holidays in September and October as the peak sales period of developers. However, Country Garden and its competitors are suffering from a lean harvest this year.
According to a research report by E-house, 40 representative cities have seen the total area of property sold climb by an average of five percent from January to August this year, down from 7.7 percent growth in the same period of 2017. During that same time frame this year, first-tier cities such as Shanghai and Beijing, saw a 18 percent decrease year-on-year in terms of transaction area.
In order to stimulate sales revenue, major developers have begun offering discounts and more favourable financing terms. Evergrande in September announced nationwide discounts of 11 percent on residential properties and price cuts of up to 40 percent on commercial units.
In September, Vanke lowered the price of a newly launched project in the city of Xiamen in Fujian Province, with some homes being offered at 40 percent discounts.