The distribution of 40,000 free housing vouchers worth a total of 240 million yuan (US$35.1 million) to local residents at a Nanjing real estate fair has sparked controversy in the city, the capital of East China’s Jiangsu Province.
Locals waited patiently in six long queues outside the Nanjing Spring Real Estate Trade Fair on April 16 hoping to lay their hands on one of 40, 000 sets of free housing worth a total of 240 million yuan that were to be distributed by the organizers. Staff said people started arriving at 8 am and most were still queuing at 11 am.
The vouchers were distributed by the Organizing Committee of the Nanjing Spring Real Estate Trade Fair – an event sponsored by the local government.
Each citizen with a valid ID card was entitled to two sets of housing vouchers worth a total of 12, 000 yuan.
60 year-old Yang Zhongliang arrived early at the distribution point with his wife. "We found two apartment blocks that would be suitable for our son to live in," he said. "When we found out that both accept housing vouchers, we decided to come here to queue up."
It was the hope of promoters that this would generate 4 billion yuan in sales, but this is overly optimistic:
[M]any residents didn’t use the vouchers they received.
"I don’t know how much the housing vouchers will help," said Yang Zhongliang.
"If I save 2, 000 to 3, 000 yuan on a house that costs hundreds of thousands of yuan it makes very little difference," said Zhang Daxin, a resident from Jianye District. But Yang Zhongliang and his wife maintained that anything is better than nothing.
Lu Yingxi, Associate Research Fellow at Nanjing University of Finance and Economics, said housing vouchers were effectively a way for real estate firms to offer discounts. High discounts will drive sales, he said, but if the discount is as low as one or two percent, the measure will have little effect. Many other experts also took a dim view of the usefulness of the vouchers.
Some principles seem to be global in nature. Clearly when the buying fever is over, no gimmick is going to compensate for an old fashioned price correction.
Twist,
This program is evidence of a danger that I have written about for years. China is attempting to create a full circle “domestic expansion” economic model. Yes, just like that of the U.S. of old.
If in fact China can spur internal consumption (which they freely admit is their goal)they would require more natural resources than the world has to give.
China is currently taking advantage of sagging commodity prices by amassing enormous stocks of metals and other resources that are critical to industry. At the same time, they seem to be losing their appetite for U.S. treasuries.
These are in fact…interesting times.