After 2021, house prices in mainland China continued to decline, leading to the largest asset shrinkage experienced by the people in nearly a decade. The latest report from “Next Wave Research Institute,” a column under mainland Chinese tech media and entrepreneurship platform 36Kr, describes the property crisis encountered by several ordinary individuals. The ups and downs of their individual destinies reflect the deep pain that the decline in house prices in mainland China has brought to the common people.
In 2019, Zhang Luo (pseudonym), a post-85s home buyer, purchased a 70-square-meter second-rate school district house for a total price of 1.05 million.
At that time, she already knew that the price per square meter of 15,000 yuan was more than twice the construction cost of houses in the eastern coastal city where she lived.
As a result, in 2020, prices in that area slowly started to slide. Another year passed, and the price per square meter dropped to 10,000.
In March this year, Zhang Luo listed the house for 550,000, but no one came to view it, and the entire neighborhood has had no transactions in nearly half a year. She still owed 440,000 on the mortgage of this house, with a down payment of 550,000 (from her mother’s pension), and all the interest went down the drain.
And this situation has occurred in countless “Zhang Luo” across the country.
Xiao Yi (pseudonym) bought a house a year earlier than Zhang Luo, in the second half of 2018. At that time, Xiao Yi wanted to get married, just sold a company, had sufficient funds, and saw house prices in Guangzhou rise from 40,000 to 60,000 since 2014. In view of the rising trend at that time, Xiao Yi felt that if he did not buy now, he would not be able to afford it later.
So, he chose a rare new property in the old district of Guangzhou, a new house with fine decoration, in a good school district, and well-connected, with a total price of 6.4 million. Xiao Yi chose to leverage heavily, with a down payment of 2 million and a loan of 4.4 million.
Xiao Yi’s loan interest rate is around 6.45%, initially having to repay 26,000 per month on the mortgage, with 21,500 being interest.
Last August, he and his colleagues went to see several houses, which immediately made him collapse. The house that had the greatest impact on him in August, with a listed area of 69 square meters, three bedrooms and two living rooms, usable area of nearly 100 square meters, total price of 1.8 million, “the location is good, the transportation is good, just a kilometer or two away from me, but its price is half of mine, and the area is much larger, this is too much.”
Xiao Yi’s house has a construction area of 100 square meters, but the usable area is just over 70 square meters. He listed the house information at the lowest price of the same type in the same neighborhood, and it sold in October last year for 4.05 million. Xiao Yi calculated that, including the lost down payment and the interest paid over the years, the total loss was close to 4 million. But if he doesn’t sell it, this house will become a negative asset, unable to cover the remaining 3.98 million mortgage.
When Era bought the old penthouse in Fengtai, Beijing, she also thought she had avoided the peak of house prices.
In April 2022, Era had just been married to her partner for a month. In the intermediate area where they commuted, they found a south-facing two-bedroom apartment, located on the top floor of a six-story building built in 1994. “The wider the bedroom, the wider the window. Plus, on the top floor, there was no obstruction, and the bedroom seemed very spacious and bright when you entered.” The young couple, who had not seen many houses, were instantly captivated by the full sunlight in the room.
This two-bedroom apartment, listed at 3.19 million for 67 square meters, finally sold for a total price of 3.155 million, at a price of 47,000 per square meter. With a down payment of 1.55 million and a loan of 1.6 million.
In early last year, Era became pregnant, and she realized that the small house they hastily bought could not accommodate the complexities of their lives after having a child. Just arranging for the elderly to care for the child was already a problem. She wanted to switch to a larger one.
But when she opened the housing transaction software again, she saw a continuous decline in house prices. In November last year, when her child arrived in this small house, its price had already dropped to 37,000 per square meter.
In February this year, Era found that her house had incurred a loss of 1.15 million.
Era, who had not yet made up her mind to sell the house, could only frantically repay the loan early to minimize the losses. Of course, this plan had already started as soon as she bought the house, seeing that the interest on the mortgage in the banking app was almost the same as the principal, but after discovering the decline in house prices, she accelerated her repayment pace.
“Even with 20,000 in hand last year, I had to repay it early, even just two or three installments. That’s okay, it shortens the loan term. Even when I was pregnant, I had very little money on hand, sometimes not even 5,000, basically all used to repay the mortgage.” It wasn’t until the late stage of her pregnancy that Era kept 30,000 for emergencies.
For this, Era and her husband reduced their living costs to a minimum. “My husband spends only two or three thousand a month, and my unit has a canteen, so I don’t spend much money. Maybe the biggest expense last year was for check-ups.”
In the past two or three years, Era repaid about 900,000 in loans early. Besides their salaries, some came from her parents’ financial support after she became pregnant, and some from her husband’s compensation for being laid off twice. Therefore, the instability of Mr. Era’s job further intensified their worries.
During her maternity leave, Era lived with her in-laws, and they will soon move back to their own small house. With in-laws, a baby needing comprehensive care, and a young couple not arriving home until after 8 o’clock, life in a small two-bedroom without a dining room made Era feel a headache.
However, she was caught in a dilemma, fearing what to do if house prices continue to fall after buying. If they want to change houses, they must first sell this house, and between selling and buying, if house prices fluctuate, the pressure they will bear will be greater.
The pressure of falling house prices has always hung over this family. Era can’t help but keep checking real estate transaction apps, feeling more and more frustrated, sinking into endless regret for their hasty purchase of a house. Her husband, who is not good at expressing himself, would go straight to the room to play games when he got home, as that was his only way to relax. They rarely talk about house matters, and even communication in other aspects is decreasing.