Homebuyers Beware: Scalpers Cash In on Shanghai Real Estate Craze
From providing shady loans and manipulating credit ratings to even offering “marriages,” scalpers are employing audacious tactics to exploit loopholes in Shanghai’s homebuying scoring system amid soaring demand for new properties.
So prevalent were their methods during a recently concluded house buying frenzy at a new luxury residential complex that police were forced to intervene after complaints from buyers.
Around 105 ready-for-sale houses in Oriental Bay, a premium neighborhood near downtown Shanghai, drew more than 700 cash-rich homebuyers looking for 20 million yuan ($2.8 million) in returns, domestic media outlet Jiemian reported.
Ranging from spacious flats to villas, the houses drew enthusiastic buyers despite their astronomical price tags that cost between 25 million yuan and 99 million yuan. However, they were still far cheaper than second-hand properties in the same neighborhood.
In major cities like Shanghai and Beijing, the scarcity of new homes combined with regulatory restrictions have led to skyrocketing prices in the secondary property market. To address this issue, local housing authorities have implemented measures such as setting price limits to cool down the overheated market.
In the face of overwhelming demand, Shanghai uses a scoring system to determine eligible buyers. Launched in 2021, this system evaluates buyers based on factors like household ownership, marital status, and their pension contributions.
That’s where scalpers come in: They can boost a buyer’s qualifications and thus their chances of meeting the eligibility criteria to purchase sought-after properties. And despite the legal risks involved, some buyers are willing to exploit loopholes in the system.
At Oriental Bay, police responded to a fake marriage complaint. Local media reported that an anonymous buyer came across a newly-wed couple at the sales office who didn’t even know each other’s names. The report stated that scalpers could earn between 200,000 to 500,000 RMB through such fake marriages.
Other scalpers offered loans or connected buyers to people with higher scores who would make the purchase on their behalf. “A real estate agent accompanied an old man standing in front of me the whole time while registering for the pre-sale. When the bank was verifying his capital, he only had one entry on his card without any other cashflow coming in. When the bank asked where the money came from, he couldn’t answer. This type of person obviously does not meet the requirements,” local media quoted a homebuyer as saying.
Guo Ren, a lawyer from Yingke Law Firm, told Sixth Tone’s sister publication The Paper that purchasing through scalpers posed several legal risks.
According to China’s Marriage Law, post-marital property is a joint asset of both husband and wife. “If the scalper refuses to divorce or refuses to assign ownership of the property, there is a possibility that the property will be recognized as marital property, and the scalper may claim a share of the property,” said Gu.
“The incident highlights that real estate investment and speculation sentiment are still high in some cities where the price of first- and second-hand houses is inverted,” Yan Yuejin, research director at Shanghai-based E-House China R&D Institute, told Sixth Tone.
Shanghai regulators have made efforts to close marriage status loopholes previously, but according to Yan the emergence of new loopholes may now draw the attention of regulators.
(Header image: At an apartment sales center in Shanghai, June 1, 2022. VCG)