Housing Lottery Frenzy in Shenzhen, Updated

"If you win a house in the lottery, you may instantly earn millions."

Shenzhen was going nuts over a housing lottery today. The homes offered are priced far below market prices. Winners of the lottery can "win" more than 2 million yuan. As lines at banks and real estate registration offices swelled, rumors of lines 5 kilometers long spread. The number of people getting divorced at the marriage office rose one-third (I thought the government had closed this loophole). The government put out a statement to squash the more exaggerated rumors.
The government statement 华润城润府三期火到要排队离婚买?官方辟谣来了

On June 21st, 2018, the SIPO approved the pre-sale of commercial housing of China Resources Chengrun Phase 3 project developed by China Resources Land (Shenzhen) Co., Ltd. (Shenzhen Xuzi (2018) Nanshan No. 006), which approved 741 sets of pre-sale housing. The average price for filing is 85,000 yuan/square meter. After monitoring, the Bureau found that there was information disseminated from the media, such as “printing 5km queues without proof of housing” and “marriage registration offices queuing for divorce to buy a house”. It was suspected of maliciously exaggerating or distorting the facts and disrupting the real estate market order in our city. The Bureau has informed the relevant authorities of the city's Internet, public security, and market supervision departments, and will continue to conduct investigations with relevant departments to severely investigate and commit maliciously fabricated information and disrupt the order of the real estate market.

Municipal Planning National Lands Committee Nanshan Administration

June 22, 2018
iFeng: 又见疯狂购房!深圳一个楼盘开盘几乎搅动了全城
Print without housing certification queued 5 kilometers? The marriage registry line up for divorce to buy a house? All kinds of rumors stirred the whole city for a time. The brokerage Chinese reporters rushed to the Shenzhen Futian Real Estate Registration Center and the Shenzhen Nanshan Marriage Registry respectively to find out the situation and found that these places were all presenting “the whole family mobilization”.

At the Futian Real Estate Registration Center in Shenzhen, a staff member at the scene told reporters that there are not so many people in ordinary times, and the number of people who inquire about real estate information today has soared, which is obviously higher than normal. The staff member added, "It may be related to the opening of China Resources 城润府."
The rumor mill ran wild, but there was an increase in activity that sparked it. People were indeed getting fake divorces:
In the Shenzhen Nanshan Marriage Registry, a divorcing family said that there are more than 40 people ahead of them. They still have to go to the bank after they get divorced, and they have to go home to pick up the children at 5 o'clock.
One classmate of this reporter stated that his father went to a bank that can handle personal credit report business and found that almost the whole bank was filled with people who came to inquire about credit information. Other business was almost collapsed and could not be handled.
The low price is enticing:
"75,000 furnished is already very cheap." Many people are so appraised, in fact, the most tempting is not the price, but the difference. Calculated with the minimum unit size of 89 sqm at 87,000 yuan/sqm or so, regardless of future house price fluctuations and other factors, and the market price of 110,000 yuan/sqm makes it 23,000 yuan per square meter cheaper, more than 2 million yuan less than existing home prices.
Econ 101 says price floors distort supply, price ceilings distort demand. The housing lottery has literally become a lottery because it is selling homes below market value. (For the same reason, in prior years the license plate lottery in Beijing saw massive participation by people who did not own a car because they could sell (gray/black market) the plate for a substantial sum of money.) Anyone can be a winner, but first they have to qualify for the lottery. Requirements include 2 million in cash and meeting various rules for buying a new home.
"Shenzhen China Resources City" stirs Shenzhen City

On the evening of the 21st, the “Shenzhen China Resources City” WeChat public number released, “China Resources City Phase III (Phase I), (Phase II), (Four Phase) sales publicity program” news, has aroused widespread concern.

Seen from this sales plan, home buyers need to provide 2 million earnest money in one day, but also need to provide proof of identity and relationship, real estate information check list, personal credit report and other information, non-needed households need to provide relevant social security information .
Purchase restrictions include marriage status since both husband and wife own their current home. People get around this restriction with a divorce:
However, due to the purchase restriction policy, many families have already lost their qualifications to purchase homes. It is a common phenomenon to acquire homes through false divorce. What is the situation of China Resources Town Runfu Phase III?

Just today, the Nanshan Management Bureau of Shenzhen Planning and Lands Commission stated in the notice on the pre-sale of the China Resources Urban Management Office Phase III that after monitoring, it was discovered that there was a “distributed printing without housing certificate 5 km queued” from the media. Line up for divorce to buy a house" and other information, allegedly maliciously exaggerating or distorting the facts disrupts the city's real estate market order.
Tthe reporter said he spoke with buyers who obtained divorces for the purpose of buying a home:
The brokerage Chinese reporter conducted field investigations and interviews with Shenzhen Futian Real Estate Registration Center, Nanshan Marriage Registry, and other places, and interviewed buyers who had purchased houses of China Resources City Runfu Phase III to check files and divorce.
The reporter found a high volume of traffic at the real estate registration center:
Today's Shenzhen coincided with the rainy season. In the afternoon, brokerage Chinese reporters rushed to the Shenzhen Futian Real Estate Registration Center. Even before entering the parking lot, it was found that vehicles entering and leaving the parking lot of the realty registration center were significantly more than in the past.

In the permit hall, the reporter saw long queues in the terminals and the consulting window for self-service inquiries. In contrast, other windows appeared to be deserted.

A staff member at the scene told reporters that usually there are not so many people, and the number of inquiries on real estate information today has soared, clearly higher than normal. The staff member added, "It may be related to the opening of China Resources Run Factory."
Then the reporter went to the marriage registration office to see if people were queing up for divorces:
Afterwards, the brokerage Chinese reporter went to the Shenzhen Nanshan Marriage Registration Office. At the registration office, the reporter saw that the hall was also filled with people and there was hardly any spare stool.

A staff member said that there was indeed a queue in the morning. From this staff member's point of view, today is the 22nd, which is commonly known as "double days," so the number of people coming to register for marriage will be more than normal, but compared to the special auspicious days, the number is not much.
The most auspicious "double day" being August 8th. The line at the marriage often did stretch out the door at one point:
However, the reporter interviewed several “tranquil” divorced families at the scene, all of whom stated that they were there to qualify for the China Resources City's lottery.

A divorcing family said that there were more than 40 people in from of them. They had to go to the bank after getting divorced, and then they had to go home to pick up the children at 5 o'clock.

Another divorced family claimed that there was no way to buy China Resources City except to divorce. Some time ago, the investment and investment projects belonged to the luxury residential area. The arbitrage amount was even greater, but the unit size was too large and exceeded their purchasing power.
The first box in the WeChat screenshot is a link to a story: divorce rose one-third on the day.
The first comment says: people taking a day off from work today are all preparing for the housing lottery.
The next comment says: Divorce, Divorce, Divorce, Buy Buy Buy, Marry Marry Marry, again Divorce, Divorce, Divorce, Buy Buy Buy, Marry Marry Marry, again.......and so on, defeat housing regulations!
The response: but the home is broken.
Response: "laughing so hard I'm crying" emoji.
The final comment is taken from the opening of the Romance of the Three Kigdoms: "The empire, long divided, must unite; long united, must divide."
One family also stated that the number of people lining up at the marriage registration office said they were running around to real estate registration center, several banks, and the amount of people at the marriage registration center is already small.

When this reporter was about to leave, the staff of the marriage registration office deliberately told security personnel to not let in anyone who did not have a reservations.
The two major scenes were staged "The Whole Family Mobilization"

It is noteworthy that, whether it is in the real estate registration center or the marriage registry, the reporter has seen many scenes of “family mobilization” with parents and children.

At the Real Estate Registration Center, the reporter encountered a homebuyer who was planning to identify, and he asked if the minor needed to be present there and was told that if the minor had an ID, he would not need to come.

In addition, the reporter also met with a number of elderly families who were checking records, among them a family asked whether there is a fast track for the elderly.

In the marriage registration office, several families with a child divorced. Some of them had just left, and some babies looked to be only a few months old and were held by their grandparents.
As for what's driving all this, the China Resources property:
Specific types and prices are as follows:

China Resources City is a high-end residential community in the core area of ​​Shenzhen. It has a total construction area of ​​approximately 2.8 million square meters, and is equipped with approximately 700,000 square meters of business. The approximately 440,000 square-sized Wanxiang Paradise has officially opened operations last year.

China Resources City was developed in five phases. Runfu is the first high-end residential building in China Resources City. At present, the first phase has all been sold out. Only a few apartments are sold in the second phase.

Comparing the price of the previous phase of China Resources City, the filing price of the third phase is really quite a bargain.

The reporter saw that the average price of existing housing in China Resources City is currently close to 110,000.
The lottery system and price controls have turned the housing market into a lottery:
A Shenzhen real estate investor stated that the opening price of China Resources City had considerable room for value increase. A friend of hiss recently bought a nearby old house and the unit price exceeded 90,000.

Means that the smallest flat 89 unit price of 87,000 or so calculation, regardless of the future price changes and other factors, compared with the market price of 110,000, 23,000 yuan per square meter cheaper, a difference of more than 2 million compared to existing homes.

It's the same price gap as with stock market IPOs, there is a price inversion between the new properties and the old properties. In some cities where the purchase restriction policy is implemented, the difference between the old and new home prices can reach 10,000 yuan/sqm. If you win a house in the lottery, you may instantly earn millions.
Here's photos of the properties everyone is vying for:
The activity in Shenzhen today is another sign that the government has not quelled housing fever with the lottery system, but has instead stoked it. The main flaw is the price controls, in this case creating excess demand because prices are below market. Additionally, recent evidence shows credit is going around government restrictions and still flowing into the real estate market. The government is starting to crackdown harder on illegal funding practices. Yesterday, I posted Beijing Banks Violated Regulations, ¥36 B in Consumer Loans Went Into Real Estate. It is conservatively estimated that mortgage lending was 27 percent higher than reported in Beijing because consumer loans proceeds were diverted into real estate. Another Chinese article linked to in the post described how banks are cracking down on cash withdrawals from credit cards used for real estate.

This post from China Banking News puts some numbers on how much money could be flowing through credit cards: Chinese Consumers Use Credit Cards to Invest in Real Estate and Stocks:
The problem of the illicit “cashing” (套现) of credit cards had become increasingly widespread in China, with as much as 1 trillion yuan in funds obtained each year via the method.

“Cashing” or “taoxian” refers to an illicit method of obtaining cash via the use of credit cards for fake transactions or contrived product returns.

While in the past a single point of sales (POS) system corresponded to a single merchant, Wang Weidong (王卫东), chief manager, Bank of Communications Credit Card Center, said to 21st Century Business Herald that in China today a single POS machine can cater to many thousands of merchants, and thus be readily used to fabricate false transactions.

As a consequence Bank of Communications launched a crackdown in the first quarter of this year on the use of POS systems by direct sales personnel.

...Data from the Chinese central bank payments system indicates that as of the end of the first quarter of 2018 a total of 612 million credit cards had been issued in China, for an average of 0.44 per person.

13.14 trillion yuan in credit had been extended via credit cards, for an average of 21,500 yuan per card.
As long as credit supports prices, the gap between existing and new homes sold by lottery will remain. Local governments will likely announce even stricter controls to weed out fake divorces and other methods of beating the system, but until credit growth subsides, home prices will see a persistent bid. The conundrum for the government is that housing is supporting the economy amid regulatory and monetary credit tightening efforts. The push for SME lending, which will soon include a targeted RRR cut, should also intensify because the government can ill afford to lose real estate sector growth without replacing it.

Update: The lottery was today. The headline says, "Shenzhen's Housing Market Too Crazy, Look at These Millionaires Lining Up in the Rain, More Money than You and Still Desperate."

iFeng: 深圳楼市太疯狂:千万富翁排队淋雨 比你有钱还这么拼

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