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The picture shows a real estate development company's "old for new" activity. Photo by Huang Zhiling

Following home appliances, cars and other consumer goods, housing has also launched the "old for new" campaign. On July 19, the Beijing Real Estate Association and the Beijing Real Estate Agency Industry Association jointly issued the "Beijing Commercial Housing "Old for New" Campaign Proposal", announcing that from now until December 31, 2024, the city will carry out the "old for new" campaign for commercial housing to better meet the rigid housing needs and diversified housing needs for improvement of residents. How to achieve "old for new" for commercial housing? What are the specific preferential measures? The reporter conducted an interview.

First-tier cities have all joined the commercial housingTrade-in queue

On April 30, the Political Bureau of the CPC Central Committee held a meeting, emphasizing the need to continue to take measures based on the city's situation, and to coordinate the study of policy measures to digest existing real estate and optimize incremental housing in light of new changes in the supply and demand relationship in the real estate market and the people's new expectations for quality housing. Subsequently, Beijing, Tianjin and other places announced adjustments to housing purchase restrictions, Hangzhou and Xi'an cancelled purchase restrictions, and first-tier cities launched a "trade-in" campaign for commercial housing.

On May 1, Shenzhen officially launched the commercial housing "Exchange Home" campaign for residents who plan to sell second-hand commercial housing and purchase new commercial housing; Shanghai launched the commercial housing "Old for New" campaign on May 3, aiming to facilitate residents to replace houses through the "old for new" model; Guangzhou issued a commercial housing "Old for New" campaign initiative on May 22, encouraging real estate developers and intermediary agencies to provide residents with worry-free replacement services; on July 19, the Beijing Real Estate Association and the Beijing Real Estate Intermediary Industry Association called on real estate developers, intermediary agencies and related service industries across the city to actively participate in the commercial housing "Old for New" campaign, and provide residents with discounts and full-chain high-quality services when selling old and buying new.

Driven by a series of policies, the market has been significantly boosted, and the real estate market has accelerated its stabilization and recovery period, especially the second-hand housing market, where activity has increased significantly. Recently, the National Bureau of Statistics released the "Changes in the Sales Prices of Commercial Residential Properties in 70 Large and Medium-sized Cities in June 2024". The data showed that among the 70 large and medium-sized cities, the month-on-month decline in the sales prices of commercial residential properties in various cities has generally narrowed, and the year-on-year decline in the sales prices of second-hand residential properties in first-tier cities has narrowed. Among them, the sales prices of second-hand residential properties in Beijing have turned to rise for the first time this year.

According to industry insiders, the "old for new" activity for commercial housing can improve the convenience of housing transactions, shorten the house-changing cycle, and increase residents' willingness to buy houses. Relevant staff of the Beijing Real Estate Association said that since the promotion was launched two weeks ago, the "Happy Home Exchange for New Purchase" app on Alipay has received more than 90,000 hits, attracting more than 400 people to sign up and participate, and 18 houses have been locked in with deposits paid.

The picture shows a real estate development company's "old for new" activity. Photo by Huang Zhiling

Government supervision, worry-free cancellation Boosting consumers’ confidence in changing homes

According to data from the China Index Academy, more than 100 cities across the country have joined the "old for new" queue for commercial housing. From the perspective of the ways in which local governments support "old for new", there are mainly two modes: "collecting old" and "pushing out old". "Collecting old" means that real estate developers or state-owned platforms are responsible for purchasing second-hand houses, and at the same time introduce professional appraisal institutions to evaluate the value of second-hand houses. After the acquisition and exchange entities reach an agreement on the transaction price, the sale proceeds can be used to purchase designated new housing projects. For example, Zhengzhou City plans to acquire 5,000 second-hand houses in Zhengzhou City through Zhengzhou Urban Development Group Co., Ltd. in 2024.

"Pushing old houses" means that after consumers subscribe to and lock in housing sources from developers, intermediary agencies will give priority to selling second-hand houses by tilting traffic. Currently, first-tier cities such as Beijing and Shanghai mainly adopt this model.

Taking Beijing as an example, there are 31 new housing projects in the first batch participating in the "old for new" activity initiative, involving more than 9,000 housing units. Consumers can visit the activity area through the Alipay applet "Leju for new purchase" to view the geographical location of the new housing project and surrounding supporting facilities. After selecting a new house, consumers can sign a subscription agreement with the developer and pay a deposit. Subsequently, consumers can push second-hand housing information to intended intermediaries through the Beijing Real Estate Association and the Beijing Real Estate Intermediary Industry Association for second-hand housing "city-wide promotion and priority sale". Within 90 days, if the second-hand house is sold, the deposit will be converted into a down payment for the purchase of a new house; if the second-hand house is not sold, the developer will unconditionally refund the deposit in full within 15 days.

The reporter learned from the visit that one week after the launch of the "trade-in" activity, a new house has been signed in the Xingguang City project in Daxing, Beijing. The project sales staff said that the core advantage of this "trade-in" activity is that the government is involved in the entire housing purchase process, and its regulatory role has boosted consumer confidence. "Currently, all new houses in Xingguang City can participate in the 'trade-in' activity, and the deposit is unified at 100,000 yuan, and it will be deposited in the supervision account of the real estate development company and supervised by the Housing and Urban-Rural Development Commission. Before this, the deposit required consumers to pay a higher proportion of the total house price. Although the deposit will lock in the house for consumers for three months after submitting the deposit, if the second-hand house is not sold during this period, the refund of the deposit will be determined according to relevant terms." said the above sales staff.

A salesperson at the Wutong Xingchen project in Beijing told reporters that before participating in the "trade-in" activity, consumers had to pay a down payment to reserve a property, but now they only need to pay a portion of the deposit to reserve a property for a longer period of time, and this portion of the deposit will eventually be used as the consumer's purchase fee. The project salesperson said, "'Trade-in' has lowered the threshold for consumers to buy a property, giving them more choices."

In addition, Beijing's commercial housing "trade-in" also focuses on providing a full chain of housing replacement services, including providing consumers with transitional rental housing, home improvement discounts, furniture and appliance vouchers and other benefits. A relevant person in charge of Beijing Red Star Macalline told reporters that at present, five shopping malls in Beijing, including Red Star Macalline Beijing Supreme Mall, have joined the commercial housing "trade-in" activity. Consumers can receive preferential policy qualifications in the form of SMS by registering online. With this SMS, consumers can go to the designated shopping mall service desk to exchange for a 500 yuan coupon, which can be used when spending more than 5,000 yuan. Each mall is limited to 100 coupons.

Open up the "old for new" chain Second-hand housing sales are still a key link

"Old for new" is seen as an important policy tool to remove barriers to first-hand and second-hand housing transactions and help destock real estate. However, according to industry insiders, various regions are still in the policy exploration stage and there is room for further optimization and adjustment.

During the reporter's visit, many new housing project sales staff who participated in Beijing's commercial housing "trade-in" activity said: "The problem of selling second-hand houses is the biggest difficulty in promoting 'trade-in'."

"On the one hand, consumers who have demand for improved housing tend to spend more money to buy new houses with better living conditions when the prices of second-hand houses are not much different. For example, in Daxing area, even old houses built around 2000 cost about 40,000 yuan per square meter, while the price of new houses is about 50,000 yuan per square meter. On the other hand, those who have just bought houses tend to wait and see when facing the trend of falling second-hand house prices. The failure to sell second-hand houses leads to insufficient funds for consumers to buy new houses." A salesperson of the Xingguangcheng project in Daxing, Beijing told reporters, "Most consumers who come to consult about 'old for new' think that developers can directly purchase second-hand houses."

However, under the "promoting old" model, the sales process of second-hand houses is mainly to encourage real estate agencies to provide consumers who sign new house subscription agreements with "city-wide promotion, priority sales" and exclusive commission discounts for second-hand houses.

Taking Beijing as an example, there are currently 11 real estate agencies participating in the "old for new" activity for commercial housing, including 51home. According to the relevant person in charge of 51home, the house selling process is basically the same as in the past. Consumers contact the intended agency according to their own situation, negotiate the price with the agency and then list the second-hand house for sale. The specific commission discount needs to be negotiated and determined with the real estate developer.

In addition to the issue of second-hand housing sales, "where to buy a new house" is also a key factor affecting consumer decision-making. A salesperson at the Pu'an Mansion Yinyuan project in Beijing told reporters that after participating in the "old for new" activity, the developer needs to reserve housing for consumers for 90 days, and consumers can return the house unconditionally after 90 days. This means that the locked housing cannot be sold within 90 days, and there may be a risk of return after 90 days.

"The deposit was originally set to facilitate the transaction, but now the deposit paid by the consumer must be returned, which has no binding force on the consumer, and the developer or sales staff will appear to be more passive. Therefore, many of the properties participating in the 'old for new' activities are mid- to low-end or unsaleable properties. The real good properties are not difficult to sell. If they participate in the activities, it will affect the sales rhythm." said the above-mentioned sales staff of the Puyuan Mansion·Yinyuan project in Beijing.

China Index Academy pointed out that in the "old for new" model of commodity housing, consumers face limited choices. The effectiveness of the "old for new" model is closely related to the overall market temperature. In the context of a "buyer's market", there is great uncertainty in the sale of second-hand houses, and its actual effect still needs time to verify.

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Let the "old for new" policy better play its potential in destocking and stabilizing the market

Recently, the "old for new" policy for commercial housing has become popular, and many cities have issued detailed implementation rules for the "old for new" policy for commercial housing. As an innovative measure to dredge the existing market and optimize incremental housing, the "old for new" policy is gradually becoming an important driving force for promoting the stable and healthy development of the real estate market.

On May 17, the People's Bank of China and other departments explicitly cancelled the lower limit of the national personal housing loan interest rate policy, reduced the minimum down payment ratio for personal housing loans, and set up 300 billion yuan of affordable housing re-loans to support local state-owned enterprises in purchasing completed but unsold commercial housing. The "Decision of the CPC Central Committee on Further Deepening Reform and Promoting China's Modernization" issued on July 21 pointed out that it is necessary to increase the construction and supply of affordable housing, meet the rigid housing needs of the working class, and support the diversified improvement housing needs of urban and rural residents. After the introduction of a package of new policies for the real estate market, local governments quickly followed up and implemented them, actively promoting the "old for new" policy for commercial housing.

The essence of "trading old for new" is to promote the circulation and recycling of real estate. It connects the two markets of revitalizing second-hand housing and destocking new housing, providing new impetus for rebalancing the supply and demand relationship. So far, more than 100 cities across the country have launched "trading old for new" activities for commercial housing. However, from the perspective of specific implementation, the "trading old for new" activities for commercial housing in various places face problems such as limited scale and lack of market response.

The key to motivating residents to "trade old for new" is to solve the problem of digesting second-hand houses. In the existing "push old" model, which is led by real estate agencies and developers provide "no-liability cancellation of new houses" service model, selling old and buying new are independent operations, and second-hand housing transactions are still affected by market fluctuations. The actual stimulus effect of the policy is relatively limited. Although the direct "collection of old" model of state-owned enterprises has alleviated residents' concerns about replacing new ones, it is also limited by the financial strength of state-owned enterprises. Therefore, all regions should revitalize second-hand housing sources based on market supply and demand. Local governments can increase the collection and storage of second-hand houses in areas with higher rental returns based on local conditions. At the same time, it is encouraged to expand the scope of use of acquired second-hand houses. For example, in addition to being used as affordable housing, it can also be expanded to new uses such as staff dormitories, shared office spaces, and cultural and tourism homestays.

In order to meet the residents' demand for improved housing, the quality of new housing projects must be strictly ensured. "No-liability cancellation of new housing" is a guarantee for residents to change houses, and it cannot be an excuse for real estate developers to provide unsalable projects. Local governments should encourage real estate developers participating in the "old for new" program to come up with high-quality new housing projects and explore innovative ways to reduce inventory, so as to fully release residents' replacement needs. For example, Wuhu, Anhui encourages real estate developers to try the model of selling part of the property rights, and Guangdong encourages real estate developers to support residents to "rent first and then buy".

The "old for new" policy for commercial housing is a complex and systematic project. To fully tap the potential of this policy, local governments need to make overall plans, integrate resources, and coordinate the efforts of all parties. It is necessary to increase financial support and increase residents' willingness to buy houses by providing housing subsidies or tax concessions; it is necessary to establish an effective policy feedback mechanism, regularly evaluate the effectiveness of policy implementation, and make timely optimization and adjustments to meet the new housing consumption needs of residents.

Text | Reporter Zhao Xi □ Huang Zhiling