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Reporter of China Business Network: Chen Li Editors of China Business Network: Wang Yuelong, Wei Wenyi, Chen Mengyu

Recently, more and more residential communities in Chongqing have requested reductions in property service fees.

All this stems from the residential property fee standards in Chongqing’s central urban area that came into effect on June 1.

According to this standard, the maximum property service charge for elevator residential buildings is 1.9 yuan/square meter/month, and the minimum is 1 yuan/square meter/month; the maximum property service charge for residential buildings without elevators is 1.35 yuan/square meter/month, and the minimum is 0.6 yuan/square meter/month.

This price is far lower than the current property charges in many local communities.

A reporter from the National Business Daily (hereinafter referred to as the reporter or reporter) recently conducted an on-site interview in Chongqing and learned thatSince June, hundreds of local community owners have applied to reduce their current property fees.However, people from several property companies in Chongqing said in an interview with the China Business News that the property industry is a labor-intensive industry. If prices are forced to fall, it will put pressure on the company's operating income in a short period of time, and the service level will inevitably decline.

In fact, before this, cities such as Guangzhou, Qingdao and Yinchuan have already launched new property service fee management methods. Behind Chongqing's "property fee reduction trend" is the game between community owners and property companies.

Owners set up stalls to solicit signatures to reduce fees

"According to the previously signed property contract, the property company's service will automatically renew on July 29, and the charging standards will also continue, so we have to collect and organize the opinions of the owners before July 29 and report them to the community."

Recently, at the Dongyue Mansion Linyu Community in the Chayuan section of Nan'an District, Chongqing, four owner volunteers were checking and binding signature sheets and other documents submitted by the owners.

According to Mr. Zhang, Dongyuefu community consists of four groups including Jiya and Linyu, with a total of more than 3,000 owners. The houses will be delivered in 2022. Currently, the company responsible for providing property services for the community is Jinke Service Chongqing Branch.

"The current property management fee for the community is 3.5 yuan per square meter per month for townhouses and 2.5 yuan per square meter per month for high-rise buildings. However, there are still many problems in terms of greening maintenance and repair in the community, and the service quality is unsatisfactory."

Mr. Zhang told the reporter from the China Business Network that starting from June 22, the owner volunteers in his group began to contact the owners to sign and solicit their opinions on fee reduction, and collected copies of the owners' real estate certificates and ID cards in accordance with regulations, which were signed by the owners themselves or their agents. Currently, the number of owner signatures has reached the required 20%.

According to Mr. Zhang's rough calculation,If the fee reduction is successful, the property fee for the villa he purchased can be saved by 150 yuan per month, and the total savings can be 1,800 yuan per year.There are 2,128 owners in the Linyu and Jiya groups. If each household saves 1,000 yuan per year, the cumulative reduction in property fees will reach more than 2.1 million yuan per year.

According to the reporter, recently, hundreds of homeowners in Chongqing have proposed to reduce property management fees. Some communities have hung banners with messages such as "Adjust property management fees according to the fourth-level government guidance price standard (1.9 yuan/square meter/month)". Most of them are communities with property management fees of around 3 yuan/square meter/month.

In addition, some high-end residential property owners have also joined in. For example, the owners of a villa community in Liangjiang New District have also recently set up stalls to sign and reduce fees.It is required to reduce the property fee from the current 5 yuan/square meter•month to 1.485 yuan/square meter•month.

Li Chao (pseudonym), the relevant person in charge of the Chongqing region of a listed property company, said in an interview with the China Business Network reporter that since June, more than 60% of the residential communities managed by the company in Chongqing have requested to reduce property service fees, and the two sides have failed to reach an agreement through negotiations.

"At present, the owners are busy signing and submitting documents. The next step is to hold an owners' meeting (temporary owners' meeting) to negotiate with the company."

Some communities have successfully lowered property fees

The reason why so many community owners have collectively requested a fee reduction stems from a document previously issued by the Chongqing Municipal Government.

On December 26, 2023, the General Office of the Chongqing Municipal People's Government issued the "Chongqing Property Service Fee Management Measures", which stipulates that pre-sale property services for residential properties shall implement graded services and graded charges.

On February 18, 2024, the Chongqing Municipal Development and Reform Commission issued the "List of Chongqing Municipal Government Pricing for Business Service Fees (2024 Edition)", which divides property service content into four levels:Residential buildings with elevators in the central city:Level 1: 1.00 yuan/square meter•month; Level 2: 1.30 yuan/square meter•month; Level 3: 1.60 yuan/square meter•month; Level 4: 1.90 yuan/square meter•month.No elevator housing:Level 1: 0.60 yuan/square meter•month; Level 2: 0.85 yuan/square meter•month; Level 3: 1.10 yuan/square meter•month; Level 4: 1.35 yuan/square meter•month {above 40,000 square meters can be increased by 10%, below 40,000 square meters (inclusive) can be increased by 15%}.Residential buildings with elevators outside the central city:0.70-1.80 yuan/square meter•month;No elevator housing:0.40-1.30 yuan/square meter/month.

The new regulations will take effect on June 1, 2024. After the new regulations were announced, owners of residential areas in Chongqing's main city and some districts and counties signed in an orderly manner to request a reduction in property fees under the guidance of local towns, streets and communities.

"The introduction of the property management fee guidance price policy is the key background for the phenomenon that property owners in some cities are demanding a reduction in property management fees."Niu Xiaojuan, general manager of property management at China Index Academy, said in an interview with a reporter from the China Business Network that in the first half of this year, policies related to property fees have become a hot topic in the industry, and non-market pricing will affect the development of the industry to a certain extent.

"There is now an increasingly strong demand for lowering property fees.On the surface, the owners are dissatisfied with the increasingly high property fees in recent years, especially the initial property fees.As housing prices are currently low, property owners are paying more attention to property management and hope that the property fees they pay are worth the money," said Yuan Chengjian, general manager of Jiancheng Shengye, to the reporter of China Business Network.

However, it has been more than two months since the new Chongqing regulations were officially implemented, but not many communities have achieved a reduction in property service fees.

A reporter from the China Business Network learned that the property management fee standards for Phase 1 of the fourth block of Evergrande Future City have been lowered since June.

On June 12 this year, the first phase of the fourth block of Evergrande Future City, located in the University Town section of Shapingba District, Chongqing, issued a notice stating that in response to the calls of the owners, based on the actual situation of the community, and after ensuring the service quality and calculating and reporting to the street, it was decided to adjust the community property service fee to:

High-rise buildings are charged 1.9 yuan per square meter per month, low-rise buildings are charged 1.8 yuan per square meter per month, and houses are charged 2.5 yuan per square meter per month. Property parking space management fees are 70 yuan per month, and shared energy consumption fees are waived. Previously, the property management fee for high-rise residential buildings in the community was 2.4 yuan per square meter per month, while low-rise buildings and houses were charged 2.2 yuan per square meter per month and 2.8 yuan per square meter per month, respectively.

"The owners had negotiated with us in March this year, and this fee reduction is also in response to the owners' request."The relevant person in charge of the Evergrande project of Chongqing Great Wall Property Group Co., Ltd. said in an interview with the reporter of Meike that the charging standards were also based on the latest property charging standards in Chongqing.

However, many owners admitted to reporters that they paid a considerable amount of property fees every year but did not experience corresponding quality of service.

As for whether the property fee rate of the community has increased after the price reduction, the person in charge also admitted:"There has been no significant change. It has gone down and we want it to go even lower."

Property people: Reducing fees and improving quality are actually contradictory

Faced with the price cuts of his peers and the owners' expectations of fee reductions, Li Chao felt a lot of pressure.

In his opinion, this sudden wave of property fee reductions is fundamentally due to the current low point in the real estate market, and he also understands the owners' reasonable demands to reduce the cost of living.

However, Li Chao also pointed out that the standards for charging property service fees are directly related to the quality of service, and a reduction in fees means a decline in service quality.

"Lowering property fees and improving service quality are actually contradictory. Reducing fees will squeeze the profit margins of property companies. In the current market competition environment, if companies are unwilling to make concessions, they are likely to be 'pried away'."

A project manager at another listed property company in Chongqing told the China Business News that homeowners in his community are also applying for fee reductions recently."But there were marketing personnel from other property companies who sneaked into the community owner group and often made comments in the group, such as 'If the price doesn't drop, I'll change the property' and 'X's property is very good'. Later, the housekeeper learned from other owners that they were originally from other property companies."

On August 2, a Chongqing property industry insider told a reporter from the China Business Network that Chongqing's property fee guidance price policy was introduced as early as January this year, and the market had not responded much at that time. However, since June, many owners of residential communities in Chongqing have suddenly requested a reduction in property fees, and no one knows why.

The reporter noticed that the property fee guidance price policy issued and implemented by Chongqing this time is consistent with the basic standards for property service charges in the "Chongqing Property Service Fee Management Measures" issued by Chongqing in 2015 (later abolished).

Property management fees are still the main source of income for property management companies. According to Li Chao, about 90% of the income of the company in his region comes from basic property management service fees. The overall proportion of value-added services and non-owner value-added services is currently limited.

Data from China Index Academy also show that the average basic property service revenue of the top 100 companies in 2023 was approximately 1.272 billion yuan, accounting for more than 80% of the total revenue, an increase of 2.97 percentage points from the previous year.

Although the proportion of property fees has increased, the collection rate is not satisfactory. "From the actual situation in the region, the comprehensive collection rate of property fees can reach 80%, but this also includes the collection of fees in previous years. The actual collection rate this year may be only about 70%, or even lower," said Li Chao.

"When it comes to raising property fees, there is a lot of backlash from property owners."A staff member of a property management company in a residential community in Shapingba District, Chongqing, told the China Business News reporter that the community had previously considered raising property management fees, but ultimately failed to do so due to opposition from the owners.

Another person in Chongqing's property industry told the reporter from the China Business Network that many people have misunderstandings about the implementation of Chongqing's new regulations, and that this is actually just a guiding price.

“Pricing is more based on the actual situation of each project, such as service standards, hardware facilities, etc., and cannot be generalized.If we only ask for lower property fees, it is not in line with the market rules.”

In fact, there are also communities that pay more attention to the property service itself than the price.

On July 30, Vanke Service successfully entered Chongqing Changqing Ivy Humanistic Villa Community with the original property service price of 4.3 yuan/square meter/month. According to the "Public Announcement of the Voting Results of the Third Owners' Meeting of Changqing Ivy Humanistic Villa Community in 2024", from June 21 to 23 (the most concentrated period of Chongqing property fee reduction applications), Chongqing Vanke Service won the bid for the property management service of the community with more than 80% of the votes of the owners.

Many places have started adjusting property fees

Every reporter noticed thatNot only Chongqing, but cities including Guangzhou, Yinchuan, Qingdao and others have already launched new property service fee management measures.

In November 2023, Guangzhou issued new regulations on property fees, with the maximum fee for residential first-level pre-property services not exceeding 2.8 yuan/square meter•month;

At the end of December 2023, Qingdao issued the "Implementation Rules for Property Service Fee Management in Qingdao", which stipulates that the government guidance price will be implemented for the early stage of ordinary residential properties, and the upper limit of the property fee for the highest level five property service is 2.52 yuan/square meter;

On May 20 this year, Yinchuan issued the "Yinchuan City Ordinary Residential Pre-construction Property Services and Parking Fees Government Guidance Price Standard Plan", which stipulates that the property fee for residential buildings without elevators is no higher than 1.9 yuan/square meter/month, and the property fee for residential buildings with elevators is no higher than 2.2 yuan/square meter/month. The plan has been implemented since July 1 this year.

In fact, we should promote the establishment of a sound property service market mechanism with "quality and price matching" and reasonably set the maximum price.The original intention of introducing many policies is to eliminate situations such as “high fees and low services”.

"However, some owners may have misunderstood the actual meaning of the government's guidance price and mistakenly believed that the property fees of all projects in the city should be implemented in accordance with the government's guidance price."The person in charge of a project in Chongqing of a listed property company mentioned above said that the current price standards formulated in Chongqing still need to be improved. There are various types of properties, and currently there is only a distinction between those with elevators and those without elevators, while there is no distinction in the charges for high-end properties including foreign-style houses and villas.

"The degree of constraint of the property management fee guidance price on enterprises needs to be subdivided in combination with local regulations, but it is not absolutely mandatory, and property management companies cannot be forced to charge property management fees based on the government guidance price." Wang Yuchen, director of Beijing Jinsu Law Firm, said that the property management fee guidance price generally has a certain floating range, and property management companies can charge property management fees within the prescribed floating range.

At the same time, if the services provided by the property management company obviously exceed the service standards corresponding to the guidance price, it will need to charge more than the guidance price. After reporting to the relevant departments for approval, it may also charge more than the guidance price. If the property management company reaches an agreement with the owner and the owner jointly decides on the corresponding property charging standards, they can decide the specific charging price for themselves after complying with the local regulations.

“For property companies, if they offer cheap services, both quality and price will be preserved; if they offer cheap prices, both quality and price will be lost.Providing high-quality services that satisfy customers remains the key to the high-quality development of property companies." Niu Xiaojuan pointed out.

reporter| Chen Li

edit|Wang Yuelong, Wei Wenyi, Chen Mengyu, Gai Yuanyuan

Proofreading|Lu Xiangyong

｜Original article from nbdnews, Daily Economic News｜

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