Market Update

Chinese try to tame real estate boom

[Abstract]Home prices soared in recent years in the picturesque port city of Hangzhou, but government fears of a U.S.-style meltdown have led to new restrictions on sales and a severe slowdown in the market.

Reporting from Hangzhou, China —
For generations, Chinese have flocked to this historic city to enjoy its centuries-old pagodas, Buddhist temples and scenic lakes surrounded by drooping willow trees.

In recent times, Hangzhou has attracted scores of visitors for a different reason: real estate.

Hordes of buyers snapped up luxury apartments, buying out some projects within hours based on little more than floor plans. Powerful developers listed properties whose prices seemed more suitable for Beverly Hills. And the local government, flush from sales of public land to builders, built itself a $650-million headquarters.

"A flat could be worth 10 times more by the time they were done," said Chen Zhencheng, director of the National Real Estate Management Alliance, who said that the practice broke no laws. "This was happening in 30% to 50% of some building projects. The places were full of speculators."

But investing in Hangzhou property wasn't just for a quick profit. Experts say China's real estate surge has also been fueled by a dearth of investment alternatives. China's stock market is volatile and bank accounts pay little interest.

Huang Minfeng bought his two apartments to shelter his savings from rising inflation. The 35-year-old employee of a German company in Hangzhou has been rewarded handsomely. A 1,000-square-foot property he bought last year has already appreciated in value 66% to $220,600, even factoring in July's decline. He turned an 80% profit by selling an apartment he bought in 2006 for $146,000. He used that money last October to make a 40% down payment on a 1,800-square-foot apartment in a new suburb.