Risks Of Buying Property Off-Plan, People’s Bank Of China
Announcement on Evergrande Crisis
The Chinese government has calmed fears that Evergrande could
be allowed to fail and risk world economic recovery.
On Monday, without actually mentioning Evergrande, China's
central bank promised to protect consumers exposed to the housing market.
The announcement by the People's Bank of China has been seen
as a sign that authorities are ready to take steps to prevent the potential catastrophe
of Evergrande’s crisis spreading to other parts of the economy.
Evergrande has debts of around $300 billion to national and
international creditor including bondholders and 171 domestic banks plus 121
other financial firms. There are also over a million customers who have paid
for properties yet to be built and thousands of supplies and staff.
If the company is allowed to fail it could bring down banks
and cause a credit crunch squeeze on lending similar to the 2008 global
financial crisis.
China’s economy matters to the rest of the world, as it
drives demand and spending. For instance, a slowdown in construction alone
would hit Australia’s exports of Iron Ore, which represents a large part of it’s
currently locked down economy.
This week, Goldman Sachs became the latest bank to downgrade
China’s growth forecast from 8.2% to 7.8%.
Chinese buyers have also been scooping up overseas property
everywhere from London to Manila, Sydney, Auckland and Toronto where prices
have hit all-time highs this year.
Much of China’s massive growth appears to have been funded
by huge amounts of debt, something which the government has attempted to reign
in recently. This has forced property companies to tighten their belts and the
first problem to come to light is the biggest of them all Evergrande.
The conglomerate has 1300 projects in 300 cities spread
across the country. Desperate property buyers have been demonstrating outside Evergrande’s
offices. Many have invested their life savings and now fear they many never see
their money, or the apartment they bought ‘off-plan,’ again.
Buying property off-plan can be risky. Whilst you might
think you are getting a ‘below market value’ deal, you are taking the
developers word that the finished property, usually a high-rise apartment, will
be worth more than you have paid for it several years down the line.
You are also relying on the builder’s ability to finish the
project, as well as quality and ongoing management.
Developers normally retain control of the freehold and
management of the building and will enjoy residual income from often unfair
management charges for the lifetime of your lease.
Buying off-plan properties abroad is especially risky in
countries where you don’t understand local laws and taxes.
People often fail to use a lawyer when buying and overseas
property, something they would never do at home!
The key to any investing is education or knowledge,
something you were not taught in school!
Would you like to learn more about property
investing and earning extra cash from property using none of your own money?
Join A Free Property Event
Live Online Property
Networking Meeting Sunday 3 October 7PM - Click here to
register: https://bit.ly/3zvaBHR
Master your property investor networking skills
as the world moves back to normal! Discover how to create and develop
relationships in the property world and maximise your portfolio.
In today’s marketplace, businesses that are operating in the
same industry are classed as competitors. But in the world of property, it is
the complete opposite.
Fellow property investors are your allies, your motivators,
potential JV partners, private funders and more importantly, your reliable
support network.
Join great speakers and property investors online at 7:00PM
on Sunday 3rd October 2021
Click here to
register: https://bit.ly/3zvaBHR
No comments:
Post a Comment