The SCMP reports on the latest craze in China:

Developers wanting to turn a Shenzhen site into the city's tallest building are being blocked by an obstinate Hong Kong man whose building has become the mainland's latest "nail house" holdout. Choi Chu-cheung's six-floor villa in the booming central business district stands isolated in the middle of a huge construction site and the 57-year-old says it will stay until he gets more compensation. Mr Choi and his wife, Zhang Lianhao, are standing firm despite an order by the Shenzhen land resources and housing management bureau last month ordering his family to move out by yesterday.

He admits he has been inspired by a Chongqing couple who held out for 11 days, while their house stood on a mound in the middle of 10-metre-deep pit, until the developers paid up. "The couple is my model. I'm sure I will win this battle as they did," Mr Choi said of the pair, whose home was dubbed the "coolest nail house" - slang for holdouts who refuse to be hammered down while their houses stand erect like nails after those around are demolished.

Mr Choi and his wife have repeatedly rejected a cash compensation offer from the developers, who want to turn the Caiwuwei site into an 88-storey financial centre. The other 389 households accepted the developers' compensation and moved out earlier this year.

The couple have demanded that the developers offer them a new block of land of similar size near the financial centre so they could rebuild or increase the offer from 5.06 million yuan to 14 million yuan.

"According to my property rights certificate, I own more than 779 square metres," said Mr Choi, who lived in a village on the site before moving to Hong Kong. "They only offered to pay us 6,500 yuan per square metre but housing prices in this area have reached more than 18,000 yuan per square metre. I want to be paid the current market value. If not, I won't let them redevelop my land. This is our choice, the choice of the property owner."

An administrator from the Caiwuwei redevelopment office said the demands were unreasonable. "Mr Choi's land was actually Caiwuwei village collective rural land when he was one of the villagers. After 1992, the land became state-owned," the administrator said. "His land belongs to the state. He has no right to ask the government to give him new land." He said the developers had offered very good compensation and, if the couple refused to move out, the village would ask the courts for a forced eviction...

Mainland homeowners forced off their properties have repeatedly fought developers and local government to protect their assets.

This article nicely encapsulates many of the issues involved here. Firstly this kind of thing panders to a general perception that in China it's the mean property developers and greedy governments railroading poor, harmless people fighting for their property rights. In many cases that's probably true. In this case, it doesn't seem to be. 389 others all thought the developer's compensation was enough. In a classic case of economics, the "price" for holding out gets higher the fewer people that accept the compensation package. Basically this "nail house" becomes able to blackmail or extort money from the developer, especially if it's a large project and everyone else has already taken the package. There are some remedies to this, for example by making the compensation package contingent on 100% acceptance (which brings peer pressure to bear). But in this case the solo holdout is now able to extract an out-sized settlement for their obstinancy. Some might say congratulations to them for holding out and screwing more money out of the developer. But where does this leave the other 389 landholders who accepted the first, lower offer?

The next issue the article highlights is the murky world of Chinese property title. It is usually very difficult to decide who has clear title, and this is going to be an ongoing problem. However in this case the government spokesman on one hand says it's state land, but in the next breath practically concedes it is not the state's land.

Many capitalist countries have a concept of eminent domain, where the state has the power to force property owners to sell without their consent, albeit in return for just compensation. This is used when the interests of the many override the interests of the few individual property owners. Of course much hinges on the concept of "just compensation", but in this case 389 property owners clearly felt it was good enough. And while it makes for dramatic photos, the city of Shenzhen will be much better off with its new office tower brining in tax revenues, businesses, workers and the like than keeping some rundown villa. If these existing properties have heritage value (e.g. like the hutongs of Beijing) then the government can and should set up ways to protect those heritage buildings...something that even theoretically advanced Hong Kong struggles with.

So let's call this nail house what it really is: blackmail.

For more on the previous nail house incident, please read Tenement Palm's excellent summary of the story behind the story and follow that up with an absolute must-read where Dave considers Howard French's IHT piece on the nail house where he discusses the faults with Western media's coverage of China and common misperceptions the media fuels. As usual, there's far more to the story than you might first think.

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