2024-08-06
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In the mountain city of Chongqing, more and more residential communities have recently requested reductions in property service fees.
The owners' demand for a reduction in property fees stems from the Chongqing Central District residential property fee standard that came into effect on June 1. According to the standard, the maximum property service fee for residential buildings with elevators is 1.9 yuan/square meter/month, and the minimum is 1 yuan/square meter/month; the maximum 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 much lower than the current property fee standard 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 that since June, hundreds of local owners have applied to reduce the current property fees. In an interview with the reporter, people from several property companies in Chongqing said that the property industry is a labor-intensive industry. If the price is forced to be reduced, the company's operating income will be under pressure 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.
"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, in the Dongyuefu Linyu community in the Chayuan section of Nan'an District, Chongqing, four owner volunteers were checking and binding the signature forms and other materials submitted by the owners one by one in a temporary "office". The so-called temporary "office" is actually the home of owner volunteer Mr. Zhang, who is also the main initiator of the volunteer working group for the application for property fee reduction in the Dongyuefu Linyu community.
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 that since June 22, the owner volunteers in his group have contacted the owners to sign and solicit opinions on fee reduction, and collected copies of the owners' property certificates and ID cards according to regulations, and signed by the owners themselves or their agents. Currently, the number of owners who have signed has reached the required 20%. "After checking and sorting, we will hand over the information to the community, and the community will organize a temporary owners' meeting to negotiate with the property company on matters such as reducing property fees."
The reporter saw from the joint application provided by Mr. Zhang that the main demands of the owners are to reduce the property fees of high-rise buildings by 0.9 yuan/square meter•month to 1.6 yuan/square meter•month, and the property fees of houses by 1.6 yuan/square meter•month to 1.9 yuan/square meter•month. At the same time, the income of public areas should be redistributed.
According to Mr. Zhang's rough calculation, if the reduction is successful, the property management fee for the house he bought can be reduced by 150 yuan per month, and the total savings can be 1,800 yuan per year. There are 2,128 owners in the two groups of Linyu and Jiya. If each household saves 1,000 yuan per year, the total reduction in property management fees will reach more than 2.1 million yuan per year. "This will truly save the owners' living costs."
The reporter learned during a field visit in Chongqing that the number of residential communities requesting reductions in property service fees is still increasing.
In the first phase of the Guanghecheng community in Shapingba, five or six owner volunteers will set up the "two tables + four stools" stall on time from 7 to 9 pm every night, and the owners will spontaneously go to the scene and sign the form "requesting to reduce the property fees in accordance with regulations"; the Rong'an Linyu Chunfeng community in Dadukou District is preparing to establish a temporary owners' committee, preparing to reduce the property fees from 2.6-3.2 yuan/square meter•month to 1.6-1.9 yuan/square meter•month; the owners of Poly Guantang community also recently issued a notice letter, requesting that the property fees be reduced from 2.8 yuan/square meter•month to 1 yuan/square meter•month in accordance with regulations.
According to the reporter, recently, hundreds of owners of residential communities in Chongqing have proposed to reduce property fees. Some residential communities have hung banners with the content of "adjusting property fees according to the fourth-level government guidance price standard (1.9 yuan/square meter·month)", most of which are residential communities with property fees of around 3 yuan/square meter·month. In addition, some high-end residential community owners have also joined in. For example, a villa community in Liangjiang New District has recently set up a stall to sign a fee reduction activity, demanding that the property fee be reduced from the current 5 yuan/square meter·month to 1.485 yuan/square meter·month.
Li Chao (pseudonym), the person in charge of the Chongqing region of a listed property company, said in an interview with a reporter from the China Business Network that since June, more than 60% of the residential communities managed by the company in Chongqing have proposed to reduce property service fees, and the two sides have not reached an agreement through negotiations. "Currently, 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."
During the visit, the reporter found that some owners were worried about the reduction of property fees. "I have always been very satisfied with the property management of our community. For example, sometimes when I am too busy at work and come home too late, the housekeeper will help pick up the express and deliver it to my door." Mr. Zhang, an owner of a community in Chongqing Liangjiang New District, told reporters that once the property management can no longer withstand the pressure and reduces the property service fee, the owners will suffer in the end. However, Mr. Zhang also said that his community is composed of multiple groups, with more than 10,000 owners as a whole, and it is difficult to establish an owners' committee, so "it should be difficult to reach a consensus (on reducing property service 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 of Business Service Fees (2024 Edition)", which divides the property service content into four levels. Residential buildings with elevators in the central urban area: 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. Residential buildings without elevators: 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 {10% floating for buildings above 40,000 square meters, 15% floating for buildings below 40,000 square meters (inclusive)}. Residential buildings with elevators outside the central urban area: 0.70-1.80 yuan/square meter • month; residential buildings without elevators: 0.40-1.30 yuan/square meter • month.
The above two documents clearly state that the pre-construction property charges for residential properties will be uniformly implemented at the government guidance price (hereinafter referred to as the property fee guidance price policy or new regulations), and the previous price management form combining the government guidance price and the market adjustment price will no longer be adopted. If it is necessary to charge more than the fourth-level service standard, the property company can apply to the housing and construction department and the development and reform department for price verification.
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 that has triggered the phenomenon of property owners in some cities 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 management fees have become a hot topic in the industry, and non-market pricing will affect industry development to a certain extent.
"The increasingly strong demands for lowering property fees are, on the surface, due to the owners' dissatisfaction with the increasingly high property fees in recent years, especially the early property fees. However, with the current low housing prices, owners are paying more and more attention to property management and hope that the property fees they pay are worth the money." Yuan Chengjian, general manager of Jiancheng Shengye, analyzed to the reporter of China Business Network that, from a deeper perspective, with the progress of the times, owners' awareness of their rights has become stronger, and they are becoming more familiar with the relevant laws and regulations on property management and the property rights system. They have a clearer understanding of the professional field of property management and their own demands, and have begun to take positive actions to pursue the initiative in community management.
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 actual calculations and reporting to the street on the basis of ensuring service quality, it was decided to adjust the community property service fee to: 1.9 yuan/square meter • month for high-rise buildings, 1.8 yuan/square meter • month for small high-rise buildings, 2.5 yuan/square meter • month for houses, 70 yuan/month for property parking space management, and no common energy consumption fee. Previously, the property fee standard for high-rise residential buildings in the community was 2.4 yuan/square meter • month, 2.2 yuan/square meter • month for small high-rise buildings, and 2.8 yuan/square meter • month for houses.
"The owners came to us for negotiation in March this year, and this fee reduction is also in response to their requests." The person in charge of the Evergrande project of Chongqing Great Wall Property Group Co., Ltd. said in an interview with a reporter from the China Business Network that the charging standards were also based on Chongqing's latest property charging standards.
Despite this, this charge has not been recognized by all owners. "There are many problems with the community management. There were frequent thefts before. My house was broken into several times." "Maintenance is not timely. It takes a long time to fix the public facilities in the community." "The charging standards are not uniform. If some owners have not paid the property management fee for a long time, the property management will give a discount in order to promote collection. Moreover, the discount ratio given by each collection staff is different."... In the interview, many owners told reporters that they paid a lot of property management fees every year, but did not experience the corresponding quality of service.
As for whether the property management fee rate of the community has increased after the price reduction, the person in charge also admitted: "There has been no obvious change. It has been reduced and we want it to be lower." According to him, the overall fee rate of the project is less than 80%, and some owners have not paid property management fees for several years. As for whether the service quality and standards will change due to the price reduction, he also said: "The overall service will still be carried out according to the previous standards, and the service quality will be improved in the future to increase the satisfaction of owners."
However, the reporter learned during the interview that the four blocks of Evergrande Future City are divided into four phases. Previously, the property fees of the other three phases were within the property fee standards stipulated by Chongqing. Only the price of the first phase was more than 2 yuan/square meter/month. The person in charge said: "This price adjustment is only for the owners of the first phase."
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 charging standards for property service fees are directly related to the service quality. Reducing fees means a decline in service quality. "Reducing 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'."
Another project manager of a listed property company in Chongqing told the reporter that the owners of his community have also recently applied for a fee reduction. "But marketing personnel from other property companies have sneaked into the community owner group and often make comments 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).
"The current implementation path for owners to reduce property fees is relatively clear and promising. Property companies should pay more attention to it, seriously consider the demands of owners, improve service levels, and increase owner satisfaction." Yuan Chengjian said that it is expected that a large proportion of communities will be able to achieve the goal of reducing property fees, which will cause a decline in the income and profits of property companies in the short term. This trend is expected to occur on a larger scale in the short term and will have a more widespread impact. If companies refuse to negotiate and communicate with owners, or fail to win the approval of owners, they may even lose project management rights.
It should be noted that 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.
Data from CRIC Property Management shows that due to multiple factors, the property fee collection rate of both the top 500 property companies and listed property companies has continued to decline in recent years. In 2023, the property fee collection rate of the top 500 property companies fell to 80%, a decrease of 4 percentage points year-on-year; the collection rate of listed property companies also fell to 85%, a further decrease of 5 percentage points year-on-year.
"Property is a labor-intensive industry. As the annual minimum wage in each city increases and the social security base is adjusted upward, the labor cost increases rigidly." Li Chao told the reporter of the China Business Network that once the property fee is determined, it is very difficult to increase it, which will put pressure on the company's operating costs over time.
"When it comes to raising property fees, there is a strong backlash from property owners." A staff member of a property management company in a residential area in Shapingba District, Chongqing, told the China Business News that the community had previously considered raising property fees, but ultimately failed to do so due to opposition from property owners.
During the interview, the reporter also learned that the property fees of many residential areas in Chongqing have not been adjusted since the delivery of the houses. For example, Longhu Haocheng Shiguang, located in Shapingba District, Chongqing, has a high-rise property fee of 2.8 yuan/square meter/month since the delivery of the houses in 2017, which has not changed for 7 years; the property fees of Shouchuang Guanghecheng in the same area have not been adjusted for 6 or 7 years.
Another Chongqing property industry insider told the reporter that many people have misunderstandings about the implementation of Chongqing's new regulations, which is actually just a guide price. "Pricing is more based on the actual situation of each project, such as service standards, hardware facilities, etc., and cannot be generalized. If you just ask for a reduction in 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.
The reporter from the China Business Network noticed that not only Chongqing, but also cities including Guangzhou, Yinchuan, Qingdao and others have launched new property service fee management measures.
In November 2023, Guangzhou issued new regulations on property fees, setting a maximum of RMB 2.8 per square meter per month for first-level residential pre-property services; at the end of December 2023, Qingdao issued the "Qingdao Property Service Fee Management Implementation Rules", stipulating that the pre-property of ordinary residential buildings shall be subject to government guidance prices, and the highest level of five-level property services shall be capped at RMB 2.52 per square meter: On May 20 this year, Yinchuan issued the "Yinchuan Ordinary Residential Pre-property Service and Parking Fee Standard Scheme", which stipulates that the property fee for residential buildings without elevators shall not exceed RMB 1.9 per square meter per month, and the property fee for residential buildings with elevators shall not exceed RMB 2.2 per square meter per month. The scheme has been implemented since July 1 this year.
In fact, the original intention of introducing many policies is to promote the establishment of a sound property service market mechanism with "quality and price matching", reasonably set the maximum price, and put an end to situations such as "high fees and low services".
"However, some owners may misinterpret the actual meaning of the government's guiding price and mistakenly believe that the property fees of all projects in the city should be implemented in accordance with the government's guiding price." The person in charge of a project in Chongqing of a listed property company mentioned above said that the current price standards formulated by Chongqing need to be improved. There are many types of properties, and currently there is only a distinction between those with elevators and those without elevators. There is no distinction between the charges for high-end properties including houses and villas.
"The degree of constraint of the property fee guidance price on enterprises needs to be subdivided in combination with local regulations, but it is not absolutely mandatory, and property companies cannot be forced to charge property fees according to the government guidance price." Wang Yuchen, director of Beijing Jinsu Law Firm, said that the property fee guidance price generally has a certain floating range, and property companies can charge property fees within the prescribed floating range. At the same time, if the services provided by the property company obviously exceed the service standards corresponding to the guidance price, it needs to charge more than the guidance price. After reporting to the relevant departments for verification, it can also charge more than the guidance price; if the property company reaches an agreement with the owner, and the owner jointly decides on the corresponding property fee standards, it can decide the specific fee price by itself after complying with the local regulations.
"Service quality is still an important factor affecting charging standards." Wang Yuchen said that the win-win situation between property companies and owners can actually be said to be a two-way investment between property companies and owners. "Generally, when the owner has signed a property service contract and the property service contract has not expired, it will be stipulated that the property charging standards will still be implemented in accordance with the original contract, which means that the owner cannot unilaterally change the original contract agreement based on the newly implemented regulations."
However, if the owner intends to adjust the property management fee, after understanding the local policy, the owner needs to check the contract signed with the property management company to clarify whether there is any relevant agreement on the adjustment of the property management fee. If it is within the agreed scope, the property management fee can be adjusted with the property management company in accordance with the agreement. If there is no relevant agreement, the owner can first convene an owners' committee or hold an owners' meeting to form a unified opinion among the owners on whether to reduce the property management fee and the standard of reduction, and then the owner's representative will negotiate with the property management company.
"For property companies, if the service is 'low-cost', both quality and price will remain; if the price is 'low-cost', both quality and price will be lost. Providing high-quality services that satisfy customers is still the key to the high-quality development of property companies." Niu Xiaojuan pointed out that the current "tile economy" incremental market has slowed down and the value center of the industrial chain has shifted backward. Property services run through the entire real estate after-sales service market and have the consumption characteristics of "rigid demand + long cycle". Property companies should change their service concepts, adjust their business strategies, and optimize value expression, from "providing services" to "designing services", from "one size fits all" to "differentiation", and from "quality and price separation" to "quality and price consistency" and then to "high quality and high price".
"Property companies need to rationally build a tiered service system, clarify service and product standards, and provide good guarantees through methods such as setting examples and benchmarks, strengthening training and strict assessment, and providing excellent incentives to ensure implementation." Niu Xiaojuan continued, property companies should strategically reconstruct their business value system, maintain their basic base by providing good basic services, expand the market in an orderly manner by focusing on target areas, and establish a second growth curve by developing diversified services based on their advantages, and lead high-quality development by providing high-quality services.
A noteworthy phenomenon is that in recent years, the property industry has put forward higher requirements for the operation of projects, and many property companies have taken the initiative to withdraw from some projects with low profit margins and high management difficulties. According to CRIC data, in 2023, many listed property companies including Country Garden Services, Vanke Cloud, and Jinke Services all chose to withdraw from some low-quality projects. The scale of the managed area withdrawn by some companies exceeded 10 million square meters. For example, the managed area of the projects withdrawn by Jinke Services was as high as 35.7 million square meters.
"Different service contents determine the level of property fees. The factors that affect property costs are very complex. The calculation of property fees needs to consider the differences in personalized factors of specific projects." Ding Zuyu, CEO of Shanghai E-House Enterprise Group, wrote that government departments should avoid a one-size-fits-all approach and should not uniformly refer to the government's guiding price. Instead, they should strengthen relevant supervision and supporting mechanisms, implement menu-based management, and customize property service standards of different dimensions according to the actual service needs of owners, and then pay different levels of property fees.
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