China has been undergoing a major corruption crackdown as of late, and the luxury housing market is starting to look a little more transparent these days.
The country’s hospitality industry has already taken a tumble as the government put bans on expensive banquets. The government has swiftly moved on to the luxury home sector and many big name real-estate moguls are trying to sell their lavish apartments as soon as possible to avoid getting caught.
Some, however, have already found themselves in a bit of trouble. Late last year, for example, an Inner Mongolia political leader named Wu Zhizhong was convicted of corruption for accepting bribes and siphoning public funds into his private accounts. The investigation revealed that he owned 33 different luxury properties in China as well as a house in Canada.
Former Guangzhou official Cai Bin — also known as “Uncle House” — was also convicted of similar crimes last year. Investigators said the corrupt businessman and his family owned more than 20 homes.
Due to the crackdown on big name businessmen, other Chinese officials have shied away from buying modern luxury homes in fear that they will attracted unwanted government attention (even if they aren’t corrupt). Many are also trying to sell their properties to avoid being investigated.
“Officials are focused on selling their homes quickly, so they are willing to sell at 5% to 10% cheaper than the average prices of comparable homes,” said Shanghai Centaline Property Consultants manager Zhang Yan.
“From a buying and marketing perspective, we have many international buyers for our U.S. homes, most from China are simply hardworking business owners with legitimate business interests in both China and the U.S.,” says Erik Cocks, Marketing at Arthur Rutenberg Homes. “The luxury custom home market for these buyers continues to be strong and price fluctuations tend not to affect them that much.”
Currently, 29% of developers are expected to decrease their investments in the luxury residential real-estate sector next year. Though the impact of the government crackdown is yet to be seen, it could strongly influence the housing market as some people may have relatively continue to purchase homes for them because there is a limit on the number of homes one is allowed to have.
The real-estate crackdown comes as the industry has already been suffering from a 10.5% decrease in the first seven months of 2014. Government officials used to make up nearly 20% of the luxury house owner population, and market analysis and investors are expecting this number to plummet in the upcoming months.
The real estate industry is still corrupt, though first-class citizens are finally starting to realize that their government means business. At the moment, officials are trying to find the loop holes corrupt home owners are using to escape conviction.