Collective bargaining secures Shenzhen block

A collective bargaining group has secured the sale of more than 100 units in a Shenzhen block of flats at deeply discounted prices, according to a group official.

'The first purchase has been completed through our collective bargaining platform,' said Zou Tao, organiser of the collective.

The activist captured national attention two years ago with a call to boycott the housing market in Shenzhen because of high prices, but has since turned to organising buyers into collective bargaining groups.

'The developer of a property in the city's suburbs was asking for 10,000 yuan (HK$11,387) per square metre but more than 100 buyers bought the units for less than 7,000 yuan per square metre in a collective purchase of the property,' Mr Zou said.

He declined to identify the property and the purchase could not be corroborated with the developer.

Last month, Mr Zou posted on his internet blog that it was time for a campaign to force housing prices down.

This time, rather than a boycott, he planned to bring 10,000 buyers together to collectively bargain with property developers for lower prices.

According to a posting on Mr Zou's website, more than 11,200 disaffected would-be home-owners had registered to join the campaign by the end of last month.

Included in this number were some who were not in a position to buy flats at any price, according to Mr Zou.

'We are now talking to six or seven developers on collective purchases,' Mr Zou said.

Responding to the latest developments, agents - who would be cut out of commission opportunities on such collective deals - said it was too early to say whether collective bargaining would become a trend for forcing lower prices.

Meanwhile, Mr Zou said he would not collect any commission, stressing that his platform was designed to make it easier for the public to own a home.

'Not all developers are willing to offer collective sales unless they face serious cash problems, and are reluctant to be forced into offering big discounts or other incentives,' said Andy Lee, the general manager of Centaline (China) in Shenzhen.

Shenzhen Peng Rui Da Industrial is an example.

After approaching Mr Zou recently, it turned down a collective sale proposal because it refused to discount its prices and now plans to sell its development, Xinda Huafu in Baoan, by the end of next month at prices of about 6,000 yuan per square metre.

'We contacted (Mr Zou) just once but we did not clinch any sales agreement or letter of intent and we have no plan to do so now,' a spokeswoman said.

However, while the outlook for collective sales remained uncertain, agents said that it was now easier for individuals to negotiate discounts from developers because of depressed market sentiment.

According to the Bureau of Land Resources and Housing Management, 1.97 million square metres of space was sold in the first seven months of this year, down 53.5 per cent on the amount sold during the same period last year.

Carol Wu, an analyst at DBS Group Research, said in a research report released this week that more downside risk was expected in the Shenzhen market.

'The current inventory level of 3.8 million sq metres and potential new supply of 3.3 million sq metres in the second half of 2008 will translate into a total supply of 7.1 million sq metres over the reminder of the year,' Ms Wu noted.

This compared with just 1.5 million sq metres of total gross floor area sold in the first half of this year.

'The supply and demand imbalance is expected to put downward pressure on prices going forward,' she said.