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Q: What security is there when you pre purchase a property?
In Australia when you buy off the plan you only pay a 10% deposit. In China you are expected to pay the full price for a property that may not be completed for 12 months or even longer. What security is there if the developer was to go bankrupt for example. Is the money held in some sort of trust account? I have asked this question many times and the usual answer is "these things never happen". What is there to stop the developer grabbing the cash and skipping town?
First, there is NO SECURITY AT ALL. Of course, you must do your homework and do check up a bit of history and performance of builder, but since they form a corporation to build each structure they put up, and when it is over they close it to limit their liability, good information is hard to find.
In all honestly, you will be on your own if you decide to buy. It is my guess that the earlier in the project, the higher the risk, but also the selling price is lower. As the project advances, normally prices per square meter go up.
If this concerns you, do look into the finnancial condition of builder, and how long has been in business, may be of some comfort to you.
And second, price is TOTALLY negotiable, and will depend on how bad they need sales. I have seen many requesting full payment up front, and I have also seen many granting a lower price per square meter, and 25 % down to reserve the unit, and timely payments as the structure progresses. Final payment is due on day unit is signed over to you, and that final payment should be in the 10 to 15 % range.
The real estate market in China in some areas is really changing from a sellers market to a buyer market in some instances.
Thanks. This is what I thought the answer would be. My partner has just purchased a property in a reasonably large development. (two office towers and 4 residential towers built on top of a large shopping mall) They are all 20+ stories above the 5 story plaza. It is right in the modern and well patronised shopping heart of Shenyang and also next to the new metro station. The external work is almost complete and the company has a number of very large developments throughout China. It was around 9K per sq mt so in the context of prices elsewhere is reasonable. Almost all of the units are already sold. She is buying it as a place for us to live on our frequent visits here, so we are less worried about future growth as it is not really an investment. There seemed to be no option except full payment, but I was not involved in the negotiation so I dont know if the developer was pressed if they would have made it available. Once the property bubble bursts here I can see a lot of people doing their cash cold due to this practice.
