In a development in Shenzhen, a property project has faced resistance from previous owners due to offering units at a 50% discount, resulting in the suspension of sales. The news of this development made it to the top search rankings on Baidu on August 22nd.
A real estate agent from the Qincheng Dayu Palace project in Shenzhen revealed to the mainland media outlet “Cailianshe” that the units in the project were being sold at a starting price of 21,000 yuan per square meter for small units, with a total price starting at 1.8 million yuan. The larger units were priced between 26,000 and 27,000 yuan per square meter, which could be further reduced with group purchase discounts.
According to “Cailianshe”, the average price of the property during its filing in May 2022 was 42,000 yuan per square meter. Therefore, the current selling prices represent a 50% discount from the recorded average price.
The discounted pricing has led to dissatisfaction and resistance from previous owners who had already purchased units in the development. In a rights protection letter, these owners demanded the immediate cessation of sales starting from August 17th. Additionally, the owners urged for the profits from the discounted sales to be distributed to them, with some proposing clear solutions for refunds or return of units by the developer.
Currently, all sales for the project have been halted, while specific outcomes regarding the demands of previous owners are yet to be disclosed.
The developer behind the project is Qiincheng Dadi Real Estate Co., Ltd. However, financial issues arose for the project after its opening in 2022, leading to a suspension of construction in 2023.
On August 12, 2024, Qincheng Dayu Palace announced a partnership with Shenzhen Longgang Ancheng Investment and Operation Co., Ltd. to resume sales. However, the development suspended sales again within a week due to significant price reductions.
Sun Hongmei, a senior analyst at the China Index Research Institute’s South China branch, stated that during the property market peak, prices in the region soared to around 40,000 yuan per square meter. However, with the market downturn, prices have now dropped to 30,000 yuan per square meter, and in some cases even as low as 20,000 yuan per square meter. Despite price reductions, attracting customers remains challenging, prompting developers to resort to deep discounts to stimulate sales.
A senior executive from a Beijing-based real estate company mentioned, “Some developers are still facing financial constraints. To expedite cash flow, slight price reductions for projects may not suffice, hence the necessity for significant price cuts.”
In China’s real estate market, developers are required to file prices with local authorities before selling properties. Adjustments, whether increase or decrease, must fall within specific limits stipulated by property pricing regulations.
However, with the continual stagnancy in the mainland real estate market and mounting debt pressures on developers, they are compelled to slash prices to generate necessary funds.
Under these circumstances, several cities in China have begun to revoke property pricing regulations. Cities like Wuhan, Zhengzhou, Shenyang, Lanzhou, and Ningde have already ceased implementing guidelines for new property sales prices, effectively lifting sales price restrictions. Others like Zhuhai, Wuhu, and Yangjiang have announced optimizations to existing pricing policies by reducing the time intervals for price adjustments and eliminating floor-level price differences.
Insiders suggest that more cities may follow suit and eliminate property pricing regulations in the future.
Discussing the potential ramifications of abolishing pricing constraints, Zhang Dawei, Chief Analyst at Zhongyuan Real Estate, noted that without pricing regulations, there is a higher likelihood of a market crash. Given the current market conditions, developers are unlikely to sell at higher prices even without controls due to the inability to attract buyers, potentially causing sharp declines in property prices in certain regions, triggering an irrational market adjustment.
Buying property in China entails significant expenditures for families, leading to scenarios where developer price cuts spark discontent and rights protection actions from existing property owners. Some extreme cases have even involved property sales offices being vandalized. Nonetheless, amidst the downturn in the property market, many internet users view developer price reductions as a necessary measure.
A user named “jingjishuxue1” remarked, “In business transactions, one party is willing to make concessions while the other has to accept consequences. If property prices rise, do previous owners have to pay more to the developers?”
Another user, “Alex Chen,” commented, “The resistance from previous owners seems unreasonable; market prices should be dictated by the market itself. However, one can empathize with the predicaments faced by previous owners as they are also ‘victims’ of the real estate market.”
Numerous internet users expressed rational opinions, acknowledging that if developers cannot recover funds, projects may remain incomplete, and homeowners might not receive their properties for years. Selling at reduced prices may at least provide developers with opportunities to complete projects and owners to secure their properties.
A user named “link1ntl” added, “If developers aren’t allowed to cut prices, they won’t recover funds for loans, which may lead to project abandonment.” Another user, “Big Dream at Dawn,” opined, “If properties cannot be sold at higher prices, prior owners might face delayed handovers or extended waiting periods. Selling at lower prices can at least help recover losses and complete construction, ensuring owners can acquire their properties.”
These discussions reflect the complexities and challenges faced by the real estate market in China, underscoring the delicate balance between developers’ financial viability, buyers’ expectations, and market dynamics.