In April of this year, the percentage of second-hand housing transactions in Shenzhen at prices lower than the official reference price set by the Chinese Communist Party continued to rise, with the price difference between transaction prices and reference prices growing larger. This news made it to the top trends on Baidu on May 4th.
According to data from the Leju Research Center, in April in Shenzhen, the proportion of second-hand housing transactions below the reference price increased from 81.4% in March to 83.3%. The proportion of transactions below the reference price by 20% saw a significant increase, rising from 20.4% in March to 29.1%, a substantial 8.7 percentage points increase.
Furthermore, the asking prices by homeowners continued to decline in April, falling below the 7,000 yuan per square meter mark. In April, the latest average listing price for second-hand homes on Leju’s website was 6,950 yuan per square meter, marking a 9% decrease in prices over the course of a year.
Overall, according to monitoring data from the Leju Research Center based on the Shenzhen Real Estate Agency Association, in April, there were 5,094 signed contracts for second-hand homes in Shenzhen, down by 2% compared to the previous month.
The Leju Research Center noted that the transaction data for April performed relatively well due to transactions in March gradually transferring in April and May. However, the data for signed contracts and transaction volume in April were still satisfactory.
Data from Leju showed a decline in transactions and property viewings at Leju stores towards the end of April. In the week ending April 28th, the transaction volume at Leju’s stores in Shenzhen decreased by over 15%, with a 10% drop in property viewings, indicating a weakening market activity towards the end of April.
In terms of new properties, both the number of presale units and area in Shenzhen saw a decrease in April. Leju Research Center’s monitoring data revealed that in April, there were 5,507 presale units for new residential properties in Shenzhen, down by 42% compared to the previous month, with a 47% decrease in presale area.
As of April 30th, the average time for new presale properties to go off market in Shenzhen was 24.9 months, staying within the range of 24 to 25 months over the past three months.
Generally, the real estate industry considers a reasonable inventory turnover cycle to be around 18 months, and exceeding this timeframe indicates significant inventory pressure.
In terms of transactions, in April, there were 2,355 transactions of new residential presale units in Shenzhen, marking a 5% increase from the previous month but a 33% decrease compared to the same period last year.
Facing a sluggish property market and high inventory pressure, in order to stimulate the new property market, Shenzhen has introduced a housing exchange program and there were rumors that after the Labour Day holiday, restrictions on property purchases in areas outside Futian and Nanshan districts of Shenzhen would be lifted, while the 5-year value-added tax rule might be reduced to 3 years before tax exemption. A report on May 3rd by The Paper mentioned that the Shenzhen Housing and Urban-Rural Development Bureau of the Chinese Communist Party did not deny these rumors, only stating that official policy announcements would come from the Bureau.
According to data from the China Real Estate Information Corporation (CRIC), as of the end of the first quarter of 2024, over 80% of the monitored 30 major cities in mainland China had a property inventory turnover cycle of more than 18 months, indicating a significant increase in inventory pressure. Cities like Changchun, Zhuhai, and Dongguan all had property inventory turnover cycles exceeding 40 months.
Affected by continuous sluggish transaction performances, the overall property inventory turnover cycle remains at a high level, with the number of cities exceeding the 18-month warning line increasing further.
Additionally, since the beginning of 2024, confidence in the real estate market has not yet recovered, with overall interest from residents to purchase property decreasing, suggesting that transactions may continue to experience a downturn. Moreover, the overall purchasing power in most second and third-tier cities has not yet recovered, resulting in persistently high inventory levels.
In an effort to address the property market situation, on February 8, 2021, the Shenzhen authorities under the Chinese Communist Party pioneered the establishment of the mechanism for publishing reference prices for second-hand residential properties, releasing guideline prices for 3,595 neighborhoods across the city. These reference prices faced widespread skepticism from the market at the time since they significantly deviated from actual market prices, generally being set at 70% of market prices, with some luxury areas having reference prices merely at 50% of market rates.