Property marauders!

When they first began foraging from city to city a decade ago, the so-called "property marauders" from Wenzhou in southeastern Zhejiang province struck terror in the hearts of aspiring homeowners from Shanghai to Chongqing and nearly every major secondary town in between.

At the time there was no record to track the origin of the Wenzhou funds and their movements. But the impact of the often sudden and unannounced influx of these investment funds in any particular targeted city was made startlingly clear by sharp jumps in residential property prices.

For that reason, local property developers, real estate agents and speculators welcomed the Wenzhou investor groups who operated through agents and from behind indecipherable corporate identities. Some of them may well have collaborated with the Wenzhou group to push up prices for mutual benefit.

In the process, the less well-informed prospective homebuyers were often caught by surprise. By the time they got wind of the influx, prices of their dream homes had already risen beyond their reach.

Nobody had any idea of how big the funds were. But they were certainly big enough to destabilize a market as large and sophisticated as Shanghai, which was among the first cities targeted by the Wenzhou high-rollers.

Crusade

On August 18, 2001, a group of 110 potential investors from Wenzhou arrived by train in Shanghai. Within a few weeks of their arrival, they bought a total of 51 high-class apartments in the choicest districts in the city. Their foray had apparently caught the fancy of many other Wenzhou manufacturers, enriched by years of booming export trade.

Huang Zhongping was 39 and one of them when he pumped 640,000 yuan into Zhong Yuan Liang Wan City in 2002 in the Putuo District of Shanghai, for an over-140 sq m apartment. "I bought the house for my child," the owner of a small shoe- manufacturing factory says. He needed a Shanghai residency permit in order to send his daughter to a Shanghai school and owning a home was one way to get one.

"I was determined to send my daughter to live and study in this metropolitan city. And a house means a Shanghai 'passport'. That's why I bought it. Very simple!" Huang recalls.

But the benefits he reaped from the house were not only his child's new-found Shanghainese status, but more fruitfully, a big fortune. "The property market went crazy after that. When I sold the house for 1.68 million yuan in 2006, my earnings were more than doubled," Huang says.

But before that, using his business acumen, Huang also sniffed out the looming real estate investment opportunities elsewhere.

In 2003, he decided to march into the country's capital Beijing with cash in hand to buy into more estates. He one-off pocketed 8 suites worth at least 8 million yuan at Yang Guang Du Shi Garden perfectly situated across the East Second and Third Rings, each occupying around 117 sq m.

"Again, the price unsurprisingly ran upwards of over 20,000 yuan from 8,000 yuan per-square-meter," Huang notes, adding that he leases his Beijing apartments to foreigners working nearby. "The rental payoffs are pretty good," he says with a mysterious smile, but refuses to disclose the exact earnings.

Huang is not alone in Wenzhou. Unofficial statistics show that as many as 100,000 Wenzhou people have successively dove into China's real estate market up until now.

"Around 10,000 to 100,000 (Wenzhou) people have been speculating in real estate, as far as I know, but it's only a conservative and loose estimate," says Ma Jinlong, professor at City College of Wenzhou University.

"We have 2 million Wenzhou natives doing business outside of here," Ma says. "The purpose of buying houses was originally not to make money, but for the sake of their children's development in big cities or just for the purpose of having a nice place to live in during their vacations."

New rich

Wenzhou, an 11,784 sq km city, pushed the development of private economies since the reform and opening-up policies began, and has since nourished some 300,000 privately owned enterprises engaged in a broad range of manufacturing activities.

The official 2006 Wenzhou Yearbook says that the private economy accounted for 95 percent of the city's gross domestic product in 2005.

Wenzhou businesspeople have an evitably large amount of cash but they have to go outside for opportunities as there is a dearth of land and resources in the city.

According to the Shanghai branch of the Wenzhou Chamber of Commerce, there are now roughly over 200,000 Wenzhou natives living in Shanghai, with 20,000 businesses run by Wenzhou people, which have invested 200 billion yuan in Shanghai market. On top of its Shanghai office, the Wenzhou Chamber of Commerce also has set up 126 other branches nationwide.

But it wasn't until the real estate market began rising out of control that Wenzhou property buyers began swarming into every corner of China for the purpose of pure investing.

"There was no what-you-dub the 'Wenzhou house speculating group' until a huge profit potential emerged," Ma says.

Before Wenzhou "property marauder" groups were suspended in 2005 due to intervention by the local government, at least 10 other groups, about 3,000 people were organized to visit mainland cities as well as Hong Kong, Macao, Singapore, even as far as Australia.

According to National Business Daily reports, Wenzhou housing investor group arrived at Fuzhou, the capital city of Fujian province in 2003 and "occupied" the city until 2006. At the time Fuzhou took the lead as having the highest housing price growth in China.

"The majority of its houses are double their original price. Some have risen 150 percent," reported National Business Daily.

In the report, a man identified only as "Mr Zhu", a Fuzhou local, recalled that he bought his three-bedroom house for 2,000-yuan a sq m in 2003. A year later when the Wenzhou invasion became the major market force, the price of the second phase of the real estate development had jumped to 2,700-yuan a sq m.

National Business Daily reported that according to a staff working for Century 21 Real Estate, Wenzhou natives bought over 40 percent of all the first-hand properties in Fuzhou in 2004 alone.

In 2004, Horizon Research, a Beijing-based professional research and consultancy firm, released a report demonstrating that most of China's newly-emerging "well-offs", which account for 5 percent of then urban population, opted to invest in the real estate industry as their first financing choice. A "well-off" is defined as someone with an annual income of at least 200,000 yuan.

Outcry

Soon, the super-heated investment forced real estate prices out of the hands of average citizens, and resulted in a national backlash against housing speculators. And Wenzhou investors, thanks to the media's exposure, bore the brunt of the fury.

Analysts and economic experts turned to the government for reactions to the sky-high real estate.

Yin Zhongli, deputy director of Financial Markets Office in Chinese Academy of Social Sciences, published a widely referenced article in Guandong's Southern Weekend newspaper on March 18, 2004, calling for government action against the rampant speculation.

"Wenzhou Chao Fang Group is inevitably linked to the sky-high properties. However, what's more crucial behind the irrational housing market, is that the government lacks effective macro-adjustment measures to curb the investment upsurge," Yin explains the reason why he wrote the story in 2004 .

The outcry was finally heard by the central government. The turning point took place in 2005 when eight measures to regulate and adjust the property market were released by the State Council. They included higher taxes and a more restricted land supply. Minimum down payments for home buyers were also set at 30 percent of the total price from the previous 20 percent.

Housing speculation dropped after the restraint policies were put into force and given the uncertainty of the industry and the probability of a future real estate recession, another investment surge for Wenzhou people is unlikely to happen again, Ma says.

(China Daily 06/30/2008 page3)