2014-04-13

Wharf Holdings: A Tale of Three Cities

Wharf Holdings (0004.HK) has (among many others) two projects in Jiangsu, one in Suzhou and one in Changzhou. Changzhou is northwest of Suzhou, to the east of Suzhou is Shanghai. They also have a project out west in Chengdu, capital of Sichuan. All three were in the news recently.

In Suzhou, a crowd of potential buyers came for a presentation on a new Suzhou development: 开盘连线|九龙仓时代上城年华里4.12晚盛大加推

A different crowd showed up in Chengdu:

The sign accuses the company of fraudulent pricing and demands the company buy back the homes. The firm used high pressure sales tactics, with warnings that preferential prices would not last for long, only for the buyers to see prices drop as much as 30% one short month later.

九龙仓成都项目直降数千遭业主围攻 被疑价格欺诈
In the new influx of buyers, the price action Wharf also led to serious discontent early old owners. According to Royal Garden Kowloon positions "rights would be" the owners surnamed Wang, said in February her 11,170 yuan / square meter price to buy a position in the Royal Garden Kowloon II 22 a 137 square meters of houses, only a month Price 370,000 yuan. "When the sales staff have been hurried to buy a house to buy, said purchase concessions soon canceled. We bought after these owners, followed by price cuts to come." Anger owners subsequently initiated action to block the sales department.

"China Business" reporter April 8 to position Royal Park Kowloon project, the sales office is still a guard. Individually and outside the hall in the sales office of security guards with helmets guarded. Under the pressure of indignant current staff positions in the Royal Park, Kowloon extremely cautious. Sales staff is also only a brief introduction to the client project for the next batch of real estate sales all the time and pricing are mollified.

Kowloon Park and the adjacent warehouse Royal Unicorn Paul Bridge, the average price reached 14,000 / square meter, CR twenty-four near the city average of 12,000 / square meter, the average price of Vanke Golden Yue 12500 / square meter, were built in New Washington price of 11,000 / square meter. In the surrounding thousands of similar products in general against the background of the price system, warehouse Royal Park in Kowloon in one fell swoop low price per square meter to more than 8000 yuan surprising.

In this case the price cuts worked to sell properties, but in the process angered recent home buyers. The impact of sudden and large price cuts on homebuyers is clear in Hangzhou: home buyers are waiting for more cuts.

As for Changzhou, where Wharf Holdings also cut prices in March and saw similar protests: Angry Chinese property investors resurface

Changzhou has also been dubbed a ghost city: Changzhou Dubbed the Second Ghost City; A Minefield of Oversupply

The price cuts are part of Wharf Holdings' strategy to move property. In 2011, many large companies aggressively cut prices as well. The strategy works because the big developers are generally better financed and can absorb low profits or even losses, whereas smaller developers are more likely to be involved with the trust lending and high interest loans.

Wharf (Holdings) Won't Rule Out Price Cuts at China Projects
Wharf (Holdings) Ltd. won't rule out cutting prices at its Chinese residential property projects due to weak demand and oversupply in some local markets, its vice chairman said on Friday.

The Hong Kong-listed developer, which has more than 50 projects in China, cut prices of some of its projects in the eastern city of Changzhou and the southwestern city of Chengdu since March.

"There are many cities where housing sales aren't strong. It's very common," said Andrew Chow, Wharf vice chairman.

Developers are cutting prices in more cities, especially in smaller Chinese cities, amid a glut of apartments in some markets and tightened credit conditions.

Mr. Chow also referred to concerns by some developers that land sales in some cities lack transparency. That can lead to too many residential towers in areas that lack schools, hospitals and other support facilities that buyers look for.

"There have been too many land sales too quickly," said Mr. Chow. "The central and local governments need to improve their urbanization plans."
The bolded part is something that was cited by Chinese developers in a story I linked to in China Home Buyers Underwater; More Ghost Cities Emerge.

I don't know if Wharf Holdings is particularly exposed to the weak housing markets in China. It just happens that this firm's name came up frequently in the past month. That said, I wonder if the crowd of potential home buyers in Suzhou won't later become another angry crowd demanding rebates or full refunds after the company slashes prices again. For the moment, Suzhou is among the stronger markets.

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