Buyers fear commercial housing presale traps

BEIJING -- The new luxury apartment Zhou bought in downtown Beijing did not bring her a pleasant and comfortable life. Instead, she and her family were forced to move out after excess levels of formaldehyde were detected in the house.

After moving to the apartment in Beijing's Chaoyang district in May, Zhou and her family started feeling uncomfortable and fell ill frequently. They decided to move out temporarily and rent another home.

Professional home inspectors checked the home Zhou bought and found that the levels of formaldehyde gas emitted by the furniture in her home exceeded normal levels.

She purchased the home about three years ago at a price of more than 100,000 yuan ($15,867) per square meter. The price amounts to the annual income of many middle-class people in the capital.

Home buyers have frequently come across quality control problems in new housing, a phenomenon stemming from the practice of using presales to sell new homes before construction is actually completed.

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"The problem is that after buyers pay for their future houses, they cannot monitor their quality," said Cao Jing, a resident of Jinan, capital of east China's Shandong province.

Cao bought her house in 2009. But when she moved to the new house in 2010, she found cracks in the walls and a water leak in the bathroom, as well as a problem with the apartment's electrical wiring.

"Changing the wiring is not easy, as it is inside the walls," she said. "If we choose to buy completed houses, we can check for such problems and then decide to buy or not."

Presales have also caused problems for developers, as early-bird buyers get upset with them if they lower the prices of commercial apartments for promotional purposes.

Wan Chengliang, a deputy general manager of a real estate company in Jinan, said one of his company's apartments initially sold for 6,000 yuan per square meter, but later saw its price lowered to 5,300 yuan. "Many early buyers came to demand the price difference," he said.

Experts estimate that presale transactions account for around 70 percent of new housing sales in China.

However, some people believe the presales are unfair, as money paid by home buyers for future homes gets turned into original capital for developers, who can then push housing prices higher by intentionally delaying their sales.

Xia Geng, vice-governor of Shandong, said some presale houses have not been delivered to buyers on time, which has led to complaints.

Xia stressed that the presale system should be improved and sales of complete houses should be encouraged in the future.

However, real estate analysts say it is unfeasible and impossible to eliminate presales for the time being.

"Selling more complete houses will be conducive to the healthy development of the sector," said Guo Songhai, head of the real estate research institute at the Shandong University of Finance and Economics.