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Jul 22

Unity is strength – Shenzhen home-buyers try group buying

Written by Buxi on Tuesday, July 22nd, 2008 at 5:27 am
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There is probably only one other issue capable of challenging the Olympics for national attention in China right now: the collapse of the housing market in China, led by Shenzhen. Home prices in Shenzhen grew very rapidly in recent years (on the order of 50%-100% ), and now appear to be falling just as quickly.

But for some people, it might not be falling fast enough. Two years ago, Zou Tao organized a campaign to fight rising prices in Shenzhen called “Not Buy House” (explanation courtesy of ESWN). The government gave Zou Tao a firm “suggestion” that such mass campaigns were not welcome. Now, he’s back. Courtesy of Southern Metropolis, an article on his new campaign (连接):

Zou Tao organized a “Not Buy House” campaign two years ago. He is now initiating a new campaign: “Housing For Ten Thousand – Group Buying Activity”. He has already established a web platform at www.zoutao.com, and online voting and registration is currently on-going. Zou Tao says that he is doing this voluntarily without any compensation. His goal is to use a group-buying model to push down housing prices, and let those without homes find a place to live.

Zou Tao said that the campaign came online on July 4th, and more than 5200 people have already signed up to participate. He anticipates having 10,000 participants in Shenzhen by August. He says that this method can relieve a real need for Shenzhen residents, while also helping housing prices come to a soft landing. He calls this an efficient path for helping average Chinese solve their housing problem.

Website design and construction has all been done on a part-time basis by volunteers. In order to prevent speculators from taking the opportunity to make profits, all those who register must confirm their identity and current housing situation. Zou Tao also explained that the banks have credit databases that will be used to verify information when mortgages are handled.

Currently, the campaign is only in the exploration phase. They are trying to reach out to housing developers capable of providing standard housing units for less than 8000 RMB/sqm, or 6000 RMB/sqm (outside of Shenzhen proper). Zou Tao said that he hopes to use this campaign to create a platform that wins discounts on housing, mortgage, and interior decoration for all those participating.

Zou Tao believes that the 8000 RMB/sqm price is a “win win” price point. It’s a price that average citizens can accept, and on the other other side, by bypassing real estate brokers and picking up unsold volume, it will provide liquid capital for real estate developers.

PS. By the way, as full disclosure… I could swear I first saw this story mentioned on a different English-language blog, but now I can’t figure out where I might’ve seen it. (Thought it was ESWN, but don’t see it there yet.) So, whoever else wrote about it, I didn’t mean to steal your thunder, and thanks for the inspiration.


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11 Responses to “Unity is strength – Shenzhen home-buyers try group buying”

  1. Buxi Says:

    For those of you staring the real estate collapse in the face in the West… now you know you’re not alone.

    Zou has the ability to get a lot of attention… he’s a minor celebrity. But the last campaign didn’t get very far, and I’m not positive it will work here either. I’d like to believe China has the scale to do things in a totally different way from what’s seen in the West, and housing is definitely a real problem for the millions of middle-class (or middle-class-wannabe) Chinese who are online…

    … but there are a thousand different practical issues involved here that seems difficult to resolve. We’ll see!

    I learned a few new things while reading about the Shenzhen housing collapse:

    1) the idea of not paying mortgage payments for is becoming a huge debate of morals,

    2) China doesn’t have personal bankruptcy. If you walk away from your mortgage, you will never be able to access the financial system until you pay it off in full.

  2. deltaeco Says:

    @buxi
    “For those of you staring the real estate collapse in the face in the West… now you know you’re not alone.”

    Doesn’t help the least to feel better about the situation here. ;-)
    (in this part of the… “west”)

    I heard about the tactic group buying before, but never occurred to me that it could be used in the housing market.

    Taking advantage of a market crisis it could be a good way to force prices down if a group of people acts together.

    Here people band together to get land property rights and build a house, the area called housing cooperatives. But given the excess of construction after the bursting of the housing bubble a different strategy could be possible.

    Interesting idea, I will propose here the idea to some worker’s syndicates I have contact with.

    Of course, we do not have the Chinese “scale”…, but it may still work.

  3. werew Says:

    The housing prices should have fallen a long time ago. Too much unstable speculation. I am pretty sure those speculation are made by middle classes from Hong Kong, so once someone lose confidence, everyone panics and drop them as fast as possible.

    Is there such a thing as anti-speculation laws?

  4. FOARP Says:

    @Werew – Shenzhen real estate is crazy, but the people who buy up properties with the intent of renting them out to fresh immigrants are performing a desirable economic task – most of those fresh migrants wouldn’t be able to afford a home of their own. I think you should discriminate between those people who buy to let and those who buy simply with the intent of selling in a few months. As for Zou Tao, I heard about this guy whilst I was over there, and I agree with him about a lot of things, but I really couldn’t see how the ‘don’t buy’ campaign was going to work given the way Shenzhen is growing. This campaign seems to have a much firmer footing, although I would be careful to watch out for scams.

  5. Netizen Says:

    Buxi,

    Group buying is not an efficient because the companies are supposed to perform this role in a free market. What’s not parent in Zou’s scheme is the risk. What’s if he takes the money and run. What if some unfavorable terms are put into the contract. What if the whole thing breaks down and everyone sues everyone else. There is much cost hidden there.

  6. Buxi Says:

    @Netizen,

    I don’t think there’s much risk of him taking the money and running; he’s not brokering the actual deal, the banks + city ministries will still be involved in the mortgage and closing the deals.

    But I agree with you: companies are supposed to perform this role in a free market. That was probably my biggest concern right off the bat. There should be a business popping up to provide this service responsibly (for fair profit)… I’m not sure a volunteer website is going to get it done.

    @FOARP,

    Rents in Shenzhen are very low relative to home prices. I think many buyers over the past 12-24 months are speculators holding for prices, and most (middle-class) Chinese are rubbing their hands in glee that they’re collapsing.

    The speculation for a long time has been that the Chinese government would step in and prop up the housing market. (Same speculation that the government would step in and prop up the stock market.) I mean, it’s the Olympics… no risk, right?

    Well, here’s how a (very widely watched.. probably 50-100 million households) CCTV news special on the housing market in Shenzhen concluded last week:

    All farmers know, that if the winter isn’t cold enough, then the parasites won’t freeze to death, and the harvest in the second year won’t be very good.

    http://house.focus.cn/msgview/895/145830355.html

    Frankly, its policies like this that make me appreciate the (authoritarian) technocrats in Beijing. Instead of bowing to special interests lobbying for bail-outs with taxpayer money, Beijing is saying as clearly as possible: those “parasites” in the housing market must die, and must die horribly. That’s good economic policy.

    I actually thought about making the “parasites” quote a blog entry…

  7. yo Says:

    Forgive me, but I still trying to absorb this group buying concept. A bunch of people ban together so they can negotiate with a housing developer for a lower price?

  8. Buxi Says:

    @yo,

    That’s basically right. Housing developers in Shenzhen hold probably thousands of unsold units… every residential “complex” holds 500+, 1000+ units… but buyers (and there are many of them) are waiting because housing prices are dropping. Very similar to what’s happening in the US.

    So, Zou is proposing a compromise. Drop prices to what he/they think are a fair price (with a reasonable profit margin for the developer), and their group would buy 10,000 units. They see it as a win/win scenario.

    I like the idea in theory… but how the heck do you make this happen in practice? I don’t know. But I know this is kind of comical/disturbing. Some American expert named Roger Dawson has been announced, with great fanfare, as the chief negotiator for the buyer group.

    Here’s Roger Dawson’s profile:
    http://www.rdawson.com/meet-roger-dawson.html

    I’m probably biased here, but I see profiles like this and I cringe.

  9. Michael Krotchie Says:

    Jumping in late here but this is a very interesting concept. Capitalism at it’s best if you ask me.

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  1. Global Voices Online » China: Housing For Ten Thousand
  2. China Journal : Best of the China Blogs: July 23

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