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Recently, the housing prices of a project called "Wanhe Optics Valley" in Wuhan, Hubei Province, dropped by nearly 10,000 yuan, causing buyers to question whether this was a "malicious price reduction". The local government department of the project, the Management Committee of the East Lake New Technology Development Zone of Wuhan, Hubei Province, replied that due to a debt dispute between the enterprise and the construction party, part of the houses were mortgaged to the construction party. Recently, the construction party sold the "construction-mortgage houses" at a low price in order to recover funds, with the highest price reduction reaching 6,000 yuan.

At the same time, the Donghu New District Management Committee stated that the price of commercial housing is determined independently by the developer based on market supply and demand, and the final transaction price is agreed upon with the buyer through a contract, but it must not exceed the pre-sale plan filing price.Enterprises adjusting commercial housing prices according to market conditions fall within the scope of independent operation of market entities and do not violate the prohibitions of laws and regulations.

The reporter of The Paper interviewed professionals and lawyers familiar with real estate, all of whom said that the concept of "malicious" cannot be defined, and that price cuts by real estate developers are market behaviors. In response to complaints from homebuyers about price cuts by real estate developers, local governments or competent departments in many places stated on the People's Daily Online leadership message board that it is a market behavior. However, some competent departments also stated that if there is evidence that real estate developers promised not to cut prices and then cut prices, it is a violation of the rules.

Governments in many places have stated that real estate developers can determine the selling price independently

The Paper found that buyers in many places left messages on the People's Daily Online leadership message board, saying that real estate developers "maliciously cut prices" and demanded compensation. In response, local governments made statements on price cuts or compensation.

On May 24, the People's Government of Baoding City, Hebei Province, responded to messages from homebuyers who said that real estate developers' price cuts were damaging their own interests, saying that commercial housing prices are market-regulated prices.Developers can independently determine sales prices based on market conditions and supply and demand relationships., home buyers and developers can negotiate to determine the final sales price of each house and include it in the contract agreement between the buyer and the seller.

In response to the message "I bought Huangge Poly Bay for more than 20,000 yuan in 2022, and now the property is sold at a price of 13,300 yuan. I ask the leader to let the company return the difference to me", the Nansha District of Guangzhou said"According to relevant regulations, developers can enjoy the right to set prices independently based on market conditions and apply for price filing or adjustment with the housing and construction department."。

Some local governments also pointed out that if developers promise not to lower prices, relevant departments will take corrective measures against them.

For example, some homebuyers reported that the developer of the residential community they purchased arbitrarily reduced the price. The Housing and Urban-Rural Development Commission of Changping District, Beijing, responded that "if the developer promises that the price of the apartment will not be reduced, the citizens can provide relevant evidence. If our commission verifies that the project has violated regulations, our commission will take corrective measures against the company in accordance with relevant regulations. If citizens have objections or believe that the developer has committed other infringements, it is recommended that they can also protect their legitimate rights and interests through legal channels."

In May, some homebuyers reported that the real estate developer of Zhonghai Yuzhong Yunjin Community secretly sold more than 500 unsold new homes in the community in the form of "work-for-housing" at a price that was nearly 40% lower than the online filing price, and the developer refused to communicate with the owners. The Chongqing Real Estate Transaction Affairs Center proposed "requiring the company to conduct self-inspection and rectification, standardize sales behavior, and actively communicate and explain to the early homebuyers."

Is there any law that allows real estate developers to reduce prices?

Can real estate developers lower prices on their own? Regarding the issue of commodity housing prices, the Chongqing Real Estate Transaction Affairs Center responded to homebuyers by stating that according to Article 6 of the Price Law of the People's Republic of China, "commodity prices and service prices, except for those that are subject to government guidance prices or government pricing in accordance with Article 18 of this Law, shall be subject to market-regulated prices and shall be independently determined by operators in accordance with this Law." Article 17 of the Measures for the Administration of the Sale of Commodity Housing stipulates that "the sale price of commodity housing shall be negotiated and agreed upon by the parties, except as otherwise provided by the State."

On the other hand, the cancellation of new home sales price limits in many places also provides a basis for real estate companies to adjust prices independently. On July 31, the Housing Security and Real Estate Management Bureau of Zhengzhou City, Henan Province, issued a notice on canceling the price guidance for commercial housing sales. The notice shows that after research by the municipal government, the housing security department will no longer provide guidance on the sales price of newly built commercial housing, and developers will sell according to their own prices and handle the pre-sale (sales) permit (filing) procedures for commercial housing.

More and more cities have issued documents to cancel the price guidance for commodity housing sales. According to statistics from the China Index Academy, since the beginning of this year, cities such as Shenyang in Liaoning Province, Lanzhou in Gansu Province, Zhengzhou in Henan Province, and Ningde in Fujian Province have clearly stated that they will no longer implement the price guidance for newly built commodity sales, that is, cancel the sales price limit. In addition, Yangjiang and Zhuhai in Guangdong Province, and Wuhu in Anhui Province have optimized the price limit policy, such as shortening the time interval for adjusting the registered price and canceling the price difference limit on the floor.

Zhang Bo, director of the 58 Anjuke Research Institute, believes that after the price limit is abolished, the price of commercial housing will be more determined by market supply and demand. In other words, in areas where the market supply exceeds demand, if real estate developers want to speed up the pace of project sales, they must make some adjustments to housing prices. Real estate developers can flexibly adjust prices based on market conditions and their own operating conditions.

Many professionals said that this is a market behavior. Lu Wenxi, a market analyst at Shanghai Centaline Property, said that price reduction itself is a market behavior. Some places have explicit regulations that the price reduction range must not be less than 15% of the registered price. From another perspective, the registered price is not static, especially now that many local governments have abolished the price limit, real estate companies have more freedom to adjust pricing according to market changes.

Restrictions on “work-for-housing” relaxed

The reporter interviewed many industry insiders and learned that under the current background of tight capital chain of real estate enterprises, even real estate enterprises that have not "exploded" will adopt the form of "work-for-house" to settle project payments. An insider of a central state-owned enterprise real estate company said that market-oriented price cuts definitely exist, and some of them are "work-for-house". In order to realize cash, these suppliers can only sell properties at a lower discount.

For "worker-backed housing", many places have relaxed policies, and even allowed the funds of "worker-backed housing" not to enter the supervision account and to sign the contract online directly. On July 29, Jiujiang City, Jiangxi Province issued a notice on "Several Measures to Further Promote the Virtuous Cycle and Stable and Healthy Development of Jiujiang Real Estate Market". The document proposes to prudently deal with "worker-backed housing" and "foreign auction housing". After verification and confirmation by the local government and submission of a written application, "worker-backed housing" for which the pre-sale supervision funds of the guaranteed housing project have not been received is allowed to sign the contract online for record. Strengthen the price control of "worker-backed housing", and the online signing and filing price should match the average price of the community.

On July 16, the Housing and Urban-Rural Development Bureau of Hezhou City, Guangxi Zhuang Autonomous Region, issued a notice on the issuance of "Several Measures for Further Promoting Housing Consumption in Hezhou City", which stipulates that "workers' housing" can be registered online without fund supervision. From now until December 31, 2025, if the construction unit uses the sales proceeds of commercial housing to offset the project construction funds, after the construction unit and the construction unit reach an agreement, "workers' housing" can be directly registered online with the "Commercial Housing Sales Contract".

On February 6 this year, Anyang County, Anyang City, Henan Province issued the "Policy Interpretation on the Implementation Opinions on Promoting the Stable and Healthy Development of the Real Estate Market", which proposed that "workers' housing" be allowed to be registered online. In order to safeguard the legitimate rights and interests of all parties to the transaction, before December 31, 2024, in principle, "workers' housing" not exceeding 10% of the total number of pre-sale permits will be allowed to be directly registered online (without depositing the down payment into the supervision account), but the invoice must be issued at the workers' price.

Regarding the current market reflection that the online signing price of "worker-discounted housing" is too low, Lu Wenxi said that "worker-discounted housing" is largely for the purpose of revitalizing assets, especially some projects with guaranteed delivery. In this way, by paying the money through "worker-discounted housing", the project can be better promoted and guaranteed delivery can be achieved.

However, some lawyers have warned that “work-discounted housing” involves certain risks.

Regarding the "worker-backed housing", Wang Yuchen, director of Beijing Jinsu Law Firm, said that when developers are facing tight capital chains, they can promote transactions and circulation in the real estate market through direct online signing and simplified procedures. This measure can not only ease the economic pressure on developers, but also speed up market flow and enhance market confidence.

Wang Yuchen also warned that this measure poses certain risks to homebuyers. First, if supervision is not in place, it will be uncertain whether the house can be delivered; second, there may be a situation where the mortgage has not been released, which will affect the delivery and confirmation of ownership of the house. Many developers have mortgaged the relevant properties. If the relevant mortgage has not been released, homebuyers who have purchased the worker-mortgage house may face difficulties in delivery and confirmation of ownership in the future.

Wang Yuchen also pointed out that if relevant departments fail to provide adequate supervision, developers may engage in illegal operations, affecting the fairness and transparency of the market, and thus affecting the stability and healthy development of the real estate market.

Yan Yuejin, deputy director of the E-House Research Institute, said that for buyers who buy "worker-discounted housing", the most direct benefit is price reduction, but there may also be transaction risks. If there is a dispute between the real estate developer and the construction company, then subscribing to some "worker-discounted housing" may result in property rights disputes. In addition, it should be noted that if real estate developers sell too much through the "worker-discounted housing" method, they may face greater financial pressure, and buyers also need to pay special attention to the delivery of the house.