Shenzhen’s local government will slap a three-year ban on residents who provide false information on new property purchases to stamp out cheats, after authorities discovered 12 fraud cases at a new housing project.
Authorities in China’s wealthiest city in southern Guangdong province announced the penalty on Saturday after witnessing a buying frenzy in several new developments. A limit on home ownership and price caps to douse speculation have failed to restrain prices, creating opportunities for buyers to flip new homes to profit from higher prices in the secondary market.
The warning shot from the Shenzhen Housing Bureau comes two days after Shanghai’s local authorities unveiled some of the most draconian policies in years to curb speculation in residential real estate, including rules to define property rights among estranged couples in the nation’s costliest housing market.
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“There are higher cases of people borrowing names of non-owners to make purchases as investors bet on continuing price hike” despite tough measures to cool the red-hot market, said Andy Lee Yiu-chi, chief executive for southern China market at Centaline Property Agency. “Cash rich investors are willing to adopt high risk methods just to make a quick buck.”
Shenzhen, a city of 13 million people, is dubbed the Silicon Valley of China and home to some of the nation’s biggest companies including Huawei Technologies, WeChat operator and online gaming giant Tencent Holdings and liquor distiller Wuliangye Yibin.
Average new home prices stood at 54,948 yuan (US$8,478) per square metre last year, the second highest in China after Shanghai’s 55,990 yuan, according to data from China Real Estate Information Corporation. Live-in home prices jumped 24.3 per cent last year to an all-time high.
Shenzhen’s housing authorities found 12 fraud cases at CR Land’s project known as CR City in Nanshan district. The project was priced at a 28 per cent discount to prices in the surrounding neighbourhood, allowing the state-owned developer to sell all 1,000 units in half a day. Buyers can make 5 million yuan per 100-sq metre by selling it immediately.
Apart from the three-year ban, people caught in the scam will also be disqualified from buying and renting units under the city’s affordable and talent housing schemes, according to Saturday’s announcement.
“To make money, some of them even use extreme ways like paying the social security costs for their relatives for five years to gain an extra home purchase quota,” Lee of Centaline Property said.
Five year’s worth of security contributions in China amounts to as little as 12,000 yuan, a small price to pay against the prospects for a multimillion windfall, he added.
Only people with residency permits in Shenzhen and who have made tax or social security contributions for five years are eligible to buy homes in the city. The rules prohibit owners from reselling their homes within three years.
The latest punitive measures also require developers and property agents to work with banks to verify a buyer’s true identity, household registration, marital status and family member certification materials, among others.
Still, “the new rules are unlikely to cool home prices in Shenzhen significantly as they are strongly supported by genuine demand,” said Lee.
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