Fresh Reports of Real Estate Rage Signal Turn in Chinese Housing Market

Chinese homebuyers have demanded to return their housing in 2008, 2011 and 2014: each time the market price declined, but real estate rage first appeared in 2011. There was a report of real estate rage in Shanghai. The developer had slashed prices by one-third and homebuyers who purchased days or weeks responded by smashing up the sales office.
"My house's value has dropped by as much as one-third, and we have lost some 10,000yuan," a homeowner surnamed Yang told Shanghai Daily.
Real estate rage returned in early 2014. Angry homeowners in Hangzhou were upset for the same reason as those in Shanghai: the developer slashed prices. They flooded the developer's office, but police were quickly on the scene.

"In 2008, 2011, 2014, there were three rounds of very obvious check-outs in the country. As long as the house price fell, the pre-purchasers began to reduce their prices." Zhongyuan Real Estate pointed out that the phenomenon of price reduction "rights" It has appeared from time to time, with 2011 being the most typical.

According to public information, since September 2011, Beijing, Shanghai, Nanjing, Ningbo and other places have continued to reduce prices and defend their rights. The sales offices of various projects such as Vanke, Longhu and Hesheng have been destroyed, and some project owners have also physical conflict with security guards.
In September, there were several reports of "real estate rage" across the country. Instead of smashing offices, homeowners are protesting outside to "protect their rights" but the cause of their anger is the same: developers slashing prices to move inventory. While this evidence is anecdotal, there have been many reports about developers moving inventory to recoup cash. More importantly, both the 2011 and 2014 "real estate rage" incidents were coincident indicators of a housing market top.

Sohu: 房子降价业主就“维权”,房地产要凉透了
Here's the most widely covered incident in Hefei. A project by the Taihe group is being protested by homeowners who paid 19,000 yuan per square meter after the company began selling homes at the promotional price of 15,000 yuan per sqm.
The latest happening, the lively event is to count the Hefei yard under the Taihe Group. On September 20th, the news of the project “discount sale” was spread from the average price of 20,000/m2 to 15,000/m2, the lowest was 13,000/m2, and the discount range was 25% to 35%.

After the news came out, the owners collectively went to the sales office to defend their rights. This matter was also confirmed by the Taihe Group. "When the price was raised, the owner did not pay the money to us, but the owner of the price reduction came to defend the rights." A person in charge of the Taihe Group reported to the 21st Century Business Herald on September 25.

The person in charge said that the price cuts really existed. Just in the past Mid-Autumn Festival, the Hefei Yard chose to reduce the price of a certain apartment by 4000 yuan/square, but then attracted the old owners to collectively defend their rights.

Because of the difference in floor plan, orientation and floor, the price of different units in Hefei Yard has a price difference. The average transaction price in the previous period is about 19,000. At present, only the individual units are used for promotion, which is reduced to about 15,000, but the full subscription is required. .
Binjiang New City in Hangzhou was a similar scene.
This project is located in the Dajiangdong Industrial Cluster of Hangzhou City. The second-phase pre-sale certificate was announced in September. The first-phase owners found that some low-rise large-sized houses had a large price difference with the same room number, up to 350,000 yuan.

This project was previously purchased by Yaohao. It has launched two batches of lottery houses. The first phase is in late August, 36, 40, 41 buildings, 382 sets of houses, and the area of ​​90 square meters is 16,600 yuan/square meter. The average price of 90~140 square meters is 17,200 yuan / square meter.

The second phase of the recent registration is to launch 27 buildings and 28 buildings with a total of 155 suites. The number of units is 93~115 square meters, 90~140 square meters, and the average price is 16822 yuan/square meter.

From the average price point of view, the two opened 90~140 square meters, the price difference is 378 yuan / square meter. However, some netizens have carefully checked that the overall price of the second phase is lower by 887 yuan/square meter.

On September 15th, about 10 first-time owners went to the future coastal sales office to “defend rights” and demanded to make up the difference, send the parking space or check out the whole amount.
The article points out that developers aren't willingly slashing prices. Developers are under financial stress and trying to recoup capital:
Therefore, in fact, it is not the developer who wants to cut the price. It is completely forced by the situation. In order to recapture capital, price reduction promotion is a common means used by developers.
21st Century: 房地产价格回归成交低迷,楼市“博傻”时代已过
As early as June of this year, the sales office of the K2 Shili Spring Breeze Project in Tongzhou District of Beijing was once surrounded by the owners who asked to return their houses. The reason was also that the price of the project was lowered.

Throughout the history of real estate development in China, the phenomenon of owners defending their rights due to price cuts has occurred from time to time, and most of them appear when the market goes down. The sales offices of large-scale housing companies such as Vanke, Poly, Longhu, etc. have all encountered "siege."
Having learned from the past three cycles, developers are using indirect price cuts to hopefully avoid triggering real estate rage:
This year's market situation is considered similar to the above three years. Under the prolonged control, developers are increasingly demanding cash flow and collection rates, and price cuts have become a viable option.

However, some real estate developers have recently reported to the 21st Century Business Herald that “direct price cuts” are usually the last choice for enterprises. Because many years of trading experience tells home buyers, direct price cuts usually lead to similar disputes.

"If you have to make adjustments, the first choice is 'downgrade'." The person said that "downsizing" refers to lowering the standards for decoration, greening and other supporting facilities on the basis of not adjusting the price, thus making up for Loss of profit margin.

At the same time of "downsizing", some projects will also reduce prices in disguise, such as reducing the gift area, increasing the price of parking spaces, and improving the price of fine decoration. These practices can also achieve the goal of making up for profit margins. For the first time, the project can choose to open low (low price opening), or price concession strategy. Most of the recent price concessions have occurred in the first open project.

The person said that choosing a direct price cut usually means that the project has “no choice”, which is a “already lost profits, and now lose reputation”.
Price cuts often follow in the wake of inflated prices as developers cashed in on the bubble:
There are many reasons for direct price cuts in real estate projects, but in general, most of them have the phenomenon of excessive pricing in the early stage.

A housing company in Changsha told the 21st Century Business Report on September 28 that in the past year, housing prices in Changsha have risen sharply, and some projects have increased their prices by more than 50% within half a year. Although there are no good quality projects in good locations, some of the lots and poor quality projects have followed suit.

This year, Changsha’s control policies have been deepened, and the implementation of “limit orders” has been particularly severe. The price of the project in a good location can be maintained, and suburban projects of poor quality have to undergo price correction.

Yan Yuejin, director of the think tank center of Shanghai Yiju Research Institute, called this adjustment "return" because "the price increase in the previous period was a irrational behavior." Under the pressure of regulation, the price bubble must be squeezed out.

He said that in China's real estate market, demand has never been released smoothly. Affected by regulatory policies, buying up mentality, etc., market demand usually shows a concentrated release, and then concentrated shrinkage. The supply side response often lags behind the demand side. Therefore, when market demand shrinks, many projects have to adjust the price strategy.
Analysts see reason for optimism given tight supply in top-tier cities and low inventory in lower-tiers:
First- and second-tier cities still have support
As the regulation of the property market continues to deepen, price adjustments may continue to spread. Yan Yuejin pointed out that the decline in project prices will bring more wait-and-see mood. Some housing companies with tight capital conditions will add their projects to the price reduction. He believes that similar cuts will occur in October. But it does not rule out the possibility of a price rebound at the end of the year.

Ouyang Jie, senior vice president of Xincheng Holdings, agrees with the above view. He pointed out that the risk of large-scale price cuts does not seem to be high. This is because: in the first- and second-tier cities with strict regulation, the demand is long-term depressed, the supply is far from sufficient, the high-end residential is more, the urban growth potential is huge, the land price is reduced, and there is no room for housing prices.

Ouyang Jie also said that some of the second-tier cities that are not yet severely regulated are also the driving force for rising house prices.

According to the report of the Shanghai Yiju Research Institute, as of the end of July 2018, the destocking cycle of new homes in 100 cities nationwide was only 9.6 months, which was significantly lower than the reasonable range of 12-16 months. Some of these cities have a de-chemical cycle of less than five months.

However, with the sinking of the regulatory policies, some third- and fourth-tier cities where house prices have risen too fast in the early period are not optimistic.

Ouyang Jie said that in the third- and fourth-tier cities where house prices are rising too fast and customer traffic is shrinking too much, there is a high probability of a price correction in the future. He pointed out that in many provinces, the prices of low-energy and low-grade cities are higher than those of high-energy and high-grade cities. In short, the price of county towns is close to or exceeds that of provincial capitals.

Ouyang Jie said that in September this year, the average price of second-hand housing in Yiwu, Zhejiang Province was 21,519 yuan/m2, up 17.25% year-on-year, and the chain was also rising. This price is already higher than many provincial capital cities in the Midwest. At the same time, the prices in many places in Hebei are higher than those in Shijiazhuang; the prices in Jiangxi Province, Yichang City, Hubei Province, and Wuhu City, Anhui Province are close to their capital cities.

The aforementioned housing companies also said that the market capacity of the third- and fourth-tier cities is not large in itself, and it has been exhausted in the previous cycle. If the sheds change to a large resurgence of monetization, the demand scale and purchasing power of these cities will be affected, and prices will appear. It is not unexpected to downgrade.
Whether these markets will hold up or not is no longer a speculative question though, because the market has turned.
Zhongyuan Real Estate pointed out that in the past three years, house prices in the country have generally risen, investment speculation has risen, and many demand have used higher leverage. Regardless of whether this round of price adjustment will spread, market participants should increase their awareness of risk, because with the normalization of the property market regulation, "the time when the price only rises and does not fall is over."


  1. The tantrums these people are throwing about an ostensibly GOOD thing (housing prices coming down to levels mere mortals might afford) reminds me a lot of the entitled California boomers I grew up around and the unofficial CA state religion of "It Always Goes Up".

  2. Housing dominates Chinese household savings and investment. This is most families' main asset and their only asset that consistently beats inflation.