A WEEK after signing a preliminary contract with her real estate agent and paying a deposit, Wu Chunquan was told she would have to pay more to buy the apartment she had decided on.

She was told that for the 110-square-metre, second-hand flat located in the Luwan District, another potential buyer was willing to pay 1.57 million yuan (US$190,000), 70,000 yuan (US$8,464) more than the price she and the real estate agent had already agreed upon.

"I knew it was a scam and I refused to give in to it," Wu said.

She gave up the apartment and got her deposit back.

In the weeks that followed, Wu kept an eye on the "much sought-after" apartment and found it was still there, waiting for a buyer.

Wu did not lodge any complaint but many others with similar experiences did - to the Shanghai Consumers' Association (SCA) and the Shanghai Price Bureau (SPB).

In response, the SPB issued a statement early this week, listing more than a dozen unlawful pricing practices reported to the bureau.

They include charging above the marked price, displaying false sales information, fabricating potential buyers, repeatedly cancelling contracts for higher returns and other deceptive or semi-fraudulent actions.

Different as all these behaviours may seem, all have one aim: forcing up prices and making unfair profits.

The SPB is now looking into the unlawful practices that have been reported and will issue an official notice once an investigation is completed, said Wei Xue, a spokesperson for the bureau.

Crackdown on profiteers

Around the same time in a high-profile crackdown on real estate profiteers, the Shanghai Municipal Housing, Land and Resources Administration Bureau (SHLRAB) shut down seven recently-completed buildings suspected of connection to unlawful pricing practices and revoked real estate development qualifications from three local developers involved.

Yifengyuan, a residential building developed by Shanghai Rongfeng Real Estate Co Ltd in the Xuhui District, was among the seven buildings closed for sale.

With only 63 apartments, Yifengyuan recorded more than 201 contract failures by the time it was closed, a cancellation rate reaching 320 per cent, according to www.fangdi.com.cn, a leading property service online source in Shanghai.

Along with the repeated cancelling of contracts and agreements, Yifengyuan's marked price soared from the original 12,980 (US$1,570) yuan per square metre to 17,189 yuan (US$2,078) per square metre by the time it was shut down.

Rongfeng, together with two other local developers - Shanghai Xinhaoshi Real Estate Co Ltd and Shanghai Hongshangshi Real Estate Co Ltd - had their real estate development qualifications revoked. Staff involved in unlawful sales were blacklisted on the fangdi website as well as on SHLRAB's official website.

"We will by no means tolerate such unlawful activities as hoarding and profiteering, forcing up prices and disrupting market order," said government spokeswoman Jiao Yang at a recent press conference.

The seven buildings will remain suspended from sale until real estate development firms and sales agencies involved are duly overhauled.

Lina Wong is a managing director of Colliers International, an overseas real estate consulting company in Shanghai. Wong welcomed the move as a step towards greater transparency in the local real estate market.

"Until the market is made more transparent, it will be difficult for overseas (real estate) companies and funds to come in and help bring domestic firms into line with international practices," she said.

Supply side moves

Cracking down on profiteers is one of a series of moves made by the municipal government now bent on bringing the local real estate market to a healthier state.

Following the introduction early last year of a capital gains tax of 5.55 per cent on homes being sold within a year of purchase, another move viewed by analysts as an attempt to curb short-term speculation is now being considered, reported the Oriental Morning Post on April 6.

Instead of being granted bank loans as soon as their cases are accepted by the Shanghai Real Estate Transaction Centre, home buyers will need to obtain a property ownership certificate first.

Also to curb speculation, SHLRAB on April 6 issued a new policy requiring owners of properties bought through mortgages to pay back all the loans before they put up their properties for sale.

The new policy will take effect on May 1.

"The new policy is designed to halt mortgage loan transfer, a practice adopted by many speculators, which has allowed them to pass their finacial risks to banks," said Li Xu, an analyst with the Shanghai-based Hangyu Property Agency.

"It's not the beginning, and also not the end," said Jiao, commenting on the recent measures taken to cool the city's overheated property sector.

As to the land supply side, since this March new measures have been launched to increase the supply of middle- and low-end residential housing to satisfy the demand of ordinary salary earners and stabilize the city's housing prices.

The city government unveiled a plan last week to construct 20 million square metres of apartments for low- and medium-income residents by the end of the year. According to the plan, all the houses would be priced below 3,500 yuan (US$424) per square metre, and are to be restricted to residents relocated by urban renewal projects and low-income families.

Also to be established is a low-rent housing system, designed to provide accommodation for poor urban residents living below 9 square metres per capita and with an annual income of less than 290 yuan (US$35).

In addition, the 15-per cent mortgage loan discount is to be expanded to more low-income families for their first home purchase. The ceiling for eligible properties was raised from 250,000 yuan (US$30,193) to 330,000 yuan (US$39,855) or from 3,500 yuan (US$422.71) per square metre to 4,500 yuan (US$543.48).

While all the recent municipal government initiatives are commendable, Wong believes more should still be done.

"As far as I know, lots of land is still cornered in the hands of so-called 'State-run enterprises'. It would help bring balance to supply and demand in the market if such land was developed at an early date," Wong said.