The old saying goes: Fool me once, shame on you. Fool me twice, shame on me. Well, shame on me. Because I've fallen into the tar pit known as the Beijing property market not once but twice. First in 1996, and again in 2003. If you have considered a property purchase in China in general and Beijing in particular, you might find these little stories interesting. The names have been changed to protect the innocent (although I cannot think of just who that is at the moment ... we are all guilty. Me of serial naivety, others of slightly more serious offences ranging from gross incompetence to corruption and fraud).
Tale No. 1. Rewind to the mid-90s. The China miracle is well into its second stage, Deng Xiaoping is still alive, and Beijing is booming as are dozens of other cities. The wave of property purchasing (and, let's be honest, brazen speculation) that started in China's South has now moved North and to Beijing in particular. Swathes of the city are being razed for villa complexes and condos.
The project my wife and I bought into is near Beijing's Ditan Park, an area within the second ring road considered very central in sprawling Beijing. Location, location, location. Got that right. We're in the money.
What we got wrong was everything else. Whether you are buying in Vancouver, Beijing or Koh Samui, never believe the "artist's conception" of the project. Never.
Of course, we did. When the project was finished in 1997 I recall going to visit and looking out the living room window at what couldn't be a grimmer scene: grey blocks of old state-built flats staring right back at me. Hey, where was the Koi pond and the waterfall? Oh that's in Phase II. Right after China puts a man on the moon.
Did I mention this was in 1996? Well, to give them credit, the building does exist. But just one catch: we have a receipt for purchase, but no deed (known as a fang chan zheng in Putonghua) and that's eight years after sinking almost $150,000 into a 1,500 square foot flat. We have neither been able to sell it or rent it. It has never been occupied.
The reason is this: the fang chan zheng is issued by the municipal government. The developer (who at the time we believe was a Hong Kong company but as it turns out it was a local outfit with a Hong Kong entity) somehow ran afoul of the local government. This is where it gets really murky. We don't even know what the problem is or was, but one thing is clear: the local authorities punish the buyers of the flats in a case like this for lack of anyone else to cane. Why this is we're not sure. Perhaps they think if enough buyers get squeezed they will somehow find a way to pressure the developer into settling its problems. Who knows?
Which leaves the "owner" in a rather tough spot. Can't sell, can't rent (except illegally but do we really need more problems?) and we obviously don't want to live in it. It was purchased as a revenue property. Not a nickel of revenue has emerged.
Eight years on, we are enmeshed in the process of suing the developer in the courts in Beijing. We have spent more than Rmb90,000 on lawyers, and there is no end in sight. The first part of the litigation process went our way, but there is no way to enforce the judgement. You encounter a lot of resigned shrugs in cases like this. We have been told frankly by our lawyer that, if all goes well, we will be lucky to exit with half our money. One learns the hard way about owning property in a place where the legal system is so weak and property rights almost non-existent.
Tale No. 2 is more recent and ends a little better. Last year, we went to see one of Beijing's "villa" complexes between the fourth and fifth ring roads. Again, location is excellent and that's what seemed so attractive. Close to the Olympic site and near the new light rail, it seemed perfect.
The developer is a large, well-known Beijing property firm. The villa and apartment complex is a massive three-phase undertaking, with only Phase 1 now occupied. It has both row houses and seven-story blocks of flats. The style is European suburban and the construction quality, on first blush, is considerably higher than most. The marketing is swish, right down to the hokey worksite hoardings that sport pictures of Caucasian couples frolicking with their children in the verdant outdoors (happy healthy families live here, get it?). This developer also has joint-venture projects with Hong Kong companies, although this isn’t one of them.
Sounded, and looked, pretty good. We bought a two-storey unit that had cathedral ceilings on the second level. The complex has a golf course on one side and is in a green belt that the Beijing Government says will remain. Cost for 2,600 square feet: about Rmb2.4 million, or $300,000 before fitting out.
The problem started when we went to fit out the place. As with many China properties, you buy an empty shell with doors and windows and roughed in wiring and plumbing. You hire an outside contractor to do the rest to your design specs.
We shopped around for a decorator/contractor and identified two. Contractor No. 1 took us to visit one of the other places they had done. While there, I noticed a bag covering the shower drain in the second floor bathroom. I asked the owner and she said that drain had a way of producing rather undesirable odours. Hmmm.
With the second contractor, we were touring another of the flats he had done in the same complex. Funny thing: the master bedroom ensuite bathroom smelled like raw sewage. Now we started to worry. But while the first contractor had evaded our questions about the sealed-off drain, the second was more forthcoming. The entire complex - hundreds of flats - had been built without the customary drain traps on the down-pipes. This means that the sanitary sewers are vented unobstructed and back up all the drains. Fixing it would be difficult because when we finally got a blueprint and took it to an independent builder, he explained that our developer had cut corners badly and there was not the correct amount of drainage piping in the place to begin with.
We immediately went back to the developer and demanded an explanation. The salesman who sold us the flat played dumb. There was a drainage problem? How odd. He had never heard of it. We pushed this time, the developer was much bigger and much more visible than the elusive builder of our first place.
There are no builders' guarantees on most China properties and it really is caveat emptor. They could have told us to take a hike, and in fact it seemed that way at first. However, they finally relented and we are getting a refund on the place. However, they do continue to sell them. Apparently a lot of buyers are not that fussed about spending 300 grand on a place where some rooms smell like ... well, let's not go there.
So buyer beware. The pitfalls are many in China property. I'm sure for every horror story like mine there are five successes. That's what I want to believe anyway. In a few weeks, we're going to be looking at a place in Beijing ...