Hot and Cold Real Estate in Anhui: Hefei on Fire, Lu'An on Ice

In Anhui province's Hefei, houses have become lottery tickets with new home prices up nearly 30 percent year-over-year, and much of the rise coming in 2016. Due west of Hefei is Lu'an, a city that still can't move 5 year old housing inventory. It is Anhui's largest prefecture level city, with 5.8 million residents, 59 percent of whom are rural.Inventory recently stood at 24 months.

Houses that sold for 3.8 million a year ago, and opened with a price of about 3.2 million last year, can now be had for 2.9 million...if the developers can find buyers. They've only sold one apartment in the building visited by the reporter. Construction in this southern part of the city, only 3 kilometers from the city center, began seven or eight years earlier (2008) and some properties would have started selling 5 years ago. Yet many developers retain sales offices because they still have inventory.

Prices in Hefei have jumped 50 percent since 2013:
According to the latest statistics, prices in Lu'an are down 5 percent in the past year, and 5 percent in the past month:
There are many half-constructed buildings in Lu'an, some with no work done for two or three years. Some homebuyers have received keys to never finished apartments, or have never received title to the property. Finished buildings have few curtains in the windows, nor the many trash cans and other signs of an occupied building.

Some developers' sales staff are playing on the mobile phones, in one office a middle aged woman working as the janitor doubles as a sales representative. Sales offices are sometimes covered in a thick layer of dust. One person excited to see the reporter was waiting in the sales office, they own a home in the building and offered to sell it. The owner wants out because work stopped on the building 5 months earlier. The developer owned money to the bank, the bank took the building and worked has ceased ever since, with the bank now suing the developer.

Related: The 8 biggest unfinished developments in Lu'an: 六安8大烂尾盘 看到第一名我惊呆了!

Due to large inventory and the general malaise in the market, prices keep falling and yet property doesn't sell. The reporter sees one sign for 2880 yuan/ sqm, about 1,000 yuan less than the surrounding homes. Yet the sales staff said even at this price, the homes don't sell.

Even as parts of the city have unmarketable homes, the city center is still buzzing. One developer's property sold out early in the morning of its opening day, and it had to use a lottery system due to high demand. However, this property sold for 5500 yuan/ sqm, only 200 yuan more than surrounding properties sold for two years earlier. In Lu'an the developers say that selling 75 percent of inventory without a price cut is a great success.

Lu'an has a large rural population. One problem for developers is the market demand for small homes is very limited. Yet larger homes that can house 3 generations are popular and sell. Another issue is many of the people in Lu'an are migrant workers who only return for Chinese New Year. Yet instead of buying a house in Lu'an, they prefer to buy one in thriving and more developed Hefei.

The government is trying to help developers, offering subsidized advertising. It also offers a 200 yuan/sqm subsidy on home purchases of less than 144 square meters, plus a 50 percent cut in taxes. The city also offers a 15 percent bonus for public takings. When it comes to infrastructure, however, the city has sometimes dropped the ball. One development has only one bus route servicing it.

iFeng: 中国房价拐点到了吗 有城市五年卖不完一楼盘

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