The Fallacy Behind the Inflated Flats – Will Standardizing Terms Make Residential Market Price in China Collapse?
International Law and Management Review, Vol. 8 (2012) 35 - 62.
28 Pages Posted: 27 Dec 2011 Last revised: 29 Jan 2015
Date Written: August 1, 2011
In China, the price of residential properties mainly depends on size of flats. However, while calculating the price the Net Floor Area (NFA) was not used, instead the Gross Floor Area (GFA), which cannot be easily assessed by the general public, was adopted. Since the difference between the NFA and the GFA keeps changing from time to time, NFA is urged by the public as the sole basis on which the price of residential property is calculated, in order to provide more reliable information to buyers.
Real estate developers object to the proposal by reasons such as price of the properties with a low NFA percentage may even collapse if their NFA is far below the GFA, which is the basis of calculating the initial selling price. The Author concludes that these arguments are invalid when new regulation standardizing terms of goods even thought are still traded in second-hand-market.
Keywords: Standard Terms, Standardization, Property Market in China
JEL Classification: K2, K23, D40
Suggested Citation: Suggested Citation