Reuters takes a closer look at the routine fraud in the housing market
Fake purchase agreements for higher amounts in order to secure more bank funding are just one scam that buyers and brokers are using in China's real estate market, according to a Reuters expose.
"Flouting of rules designed to protect banks is rampant in China's roaring property market, according to interviews with buyers, sellers and dozens of property market insiders including real estate agents, lawyers, bankers, valuers and loan middlemen from three of China's major cities and four smaller cities," the report says.
The scale of the cheating is mind-bending. It includes virtually everyone who is part of the process.
"When everyone is doing it, you can't put everyone in jail," said one lawyer in the story.
Tidbits:
- China home prices tripled from 2000 to 2015
- In 2016 prices rose 12.4%
- Some estimates say house prices have doubled in major cities in the past two years
- A veteran property agent said 50% of his sales featured clients committing some kind of fraud
Ultimately, the risks are borne by the banks and that's why Beijing is increasingly concerned.
The good news is that down payments of 30% protect the banks somewhat. The bad news is that many of those 30% down payments are also borrowed.
Expect a big government crackdown in 2018. One theory is that a cooling of house prices will put Chinese speculators back into the stock market.
