In May, new home prices increased 6.6% city wide according to NBS data, but in some areas home prices are galloping ahead by 40% to 60% and capital floods into the market.
Due to rapidly rising prices in the Shenzhen market, home sellers are reneging on sale contracts. In one case the seller refused to provide bank account information, then claimed the buyer didn't make the payment on time.
Breaches of contract in April and May are up 108.6% over last year. A Shenzhen real estate agent estimates that since April, 20% of sales have seen a breach of contract by the seller. The penalty for breaking a contract is far exceeded by the rise in home prices, making it financially attractive to break the deal.
One lawyer gives an example of a contract signed for 3.3 million yuan. The seller reneged and asked for another 1 million yuan. Even after a penalty of double the deposit plus a 20% penalty fee, the seller still walks away with another 400,000 yuan.
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