Sellers hope to ride even higher on property wave

By Wang Wei (China Daily)
Updated: 2010-03-24 07:50

An agent walks past a housing agency in the Wangjing area. Homeowners have pulled out of sales of their houses as land prices in the area have skyrocketed. Wang Jing / China Daily

Around 30 percent of people selling second-hand homes in Wangjing, Chaoyang district, have terminated contracts with buyers in recent days in anticipation of prices shooting up even higher.

Despite having to pay penalties for breaking contracts with would-be buyers, the sellers were optimistic their homes will be worth a lot more in future, following the sale of two large parcels of land in the area earlier this month that changed hands for record-breaking price tags.

Li Yan, manager of a 5i5j real estate branch in Wangjing, told METRO the two parcels of residential land sold on March 15 and 17. Li said many sellers of second-hand homes retreated from the market temporarily after that in the hopes of selling for much higher prices.

On March 15, Hong Kong listed Sino-Ocean Land successfully bid for a site in Dawangjingcun village, agreeing to pay 4.08 billion yuan.

Two days later, Poly Beijing Real Estate Limited, grabbed a 280,000-sq-m slice of land in Wangjing for 5.04 billion yuan.

Land in the area is now selling for as much as 27,529 yuan per sq m.

5i5j, which has 33 outlets in the Wangjing area, could have helped sell more than 40 homes in the area that were withdrawn before the sales were completed.

Eleven of the potential sellers ripped up contracts with would-be buyers after learning there was such a strong demand for their land.

"They broke contracts and were willing to pay penalties because the increased house price will do much more than offset the penalty," Li said.

Penalties for broken sales are usually twice the contract's down-payment, which range from 20,000 to 50,000 yuan. Following the recent land deals in the area, housing increased by around 2,000 yuan per square meter, said Li.

"On March 17 alone, I received five phone calls from clients saying that if buyers didn't raise their offers, they wouldn't sell their apartments," she added.

She told METRO about one seller who decided to hold out for more money. The seller had signed a contract with a buyer, agreeing to sell a 150-sq-m apartment for 2.82 million yuan before Jan 15. The buyer paid a 20,000-yuan down-payment.

After the high-profile land auctions, the seller terminated the contract, realizing the price of the home could increase by 300,000 yuan. After deducting the 40,000 yuan penalty for breaking the contract, the seller will be 260,000 yuan better off.

Many homeowners in Wangjing hope the cost of housing goes up even further.

Zhang Yaru, an IT programmer, told METRO he bought a 97-sq-m apartment for 12,500 yuan per sq m as an investment at the end of 2008. When the price reached 25,000 at the beginning of the year, he considered selling. Then, he decided to wait a little longer after the land auction.

"I learned from a real estate agency that the price could reach 27,000 yuan. If it reaches 30,000 yuan, I will sell immediately," he said.

Li Wenjie, general manager of property agency Centaline China (North China region) said it was common for sellers to break deals when prices were rising sharply, just as it was normal for buyers to pull out when property prices are crashing.

"The phenomenon was quite common last September when housing was going up significantly," he said. The two parcels of residential land that sold in Wangjing recently for high prices were bought by State-owned real estate companies.