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Reporter of China Business Network: Zhen Sujing Editor of China Business Network: Chen Mengyu

Recently, "worker-discounted housing" sold at prices lower than the market price has appeared in many cities such as Dongguan and Wuhan, attracting widespread attention.

At the same time, some local governments have also begun to cancel the price limit policy for new homes, allowing developers to set prices independently according to market conditions. Industry insiders believe that this change indicates a change in the way the real estate market is regulated, and will also bring new vitality and uncertainty to the market.

“Do whatever it takes to sell”

Recently, a local real estate agent in Dongguan posted a message on a social platform saying that a project in Dongguan had been reduced in price to as low as 10,000 yuan per square meter.

According to reports, the 100-square-meter low-rise building in the Yunrui Mansion project in the Mayong section of Dongguan currently has a unit price of 10,000 yuan per square meter, and any floor can be chosen. This is a price reduction by the project party to realize cash, and the supply is limited.

According to China Real Estate News, compared with the floor price of 14,000 yuan/square meter of Yunrui Mansion, the sales price of 10,000 yuan/square meter is very attractive. In addition, the Shoukai Xijiangyue located in Hongmei, Dongguan, also put out a batch of houses with a unit price of only 10,600 yuan/square meter for sale, with optional floors and fine decoration.

The reporter of Daily Economic News noticed that when Yunrui Mansion was first launched in 2022, it launched about 80 houses, and the number of frozen customers far exceeded the number of houses. It also became the first real estate in the area that required public lottery selection. Now, in the past two years, the market has become a different picture. Now on Beike, the average reference price of Yunrui Mansion is 17,000 yuan/square meter, with a total price of 1.6 million to 3 million yuan.

The original registered price of Wuhan Wanhe Guanggu was 23,000 yuan/square meter, and the recent sales price has dropped to 12,500 yuan/square meter, with the maximum drop of nearly 50%; Wuhan Nanshan Jinchen acquired the land at a floor price of 15,985.65 yuan/square meter in June 2021, and the special price housing during this year's "May Day" period is 15,000 yuan/square meter.

At the end of last year, the Dongguan Municipal Housing and Urban-Rural Development Bureau issued the "Notice on Optimizing Matters Related to the Declaration of Sales Prices of Newly Built Commercial Housing". If the sales price of newly built commercial housing that has been pre-sold (currently sold) but not sold needs to be changed, the change can only be made after 30 days from the date of obtaining the pre-sale license (or current sale registration certificate) or from the last adjustment of the declared price. Other matters remain unchanged.

A local person in Dongguan analyzed in an interview with the reporter of China Business Network that the regulations have not changed, but they are not actually mandatory, and price limits are meaningless. In the current market environment, some projects are trying every possible means to sell.

Speculation may return

Recently, many places have announced the cancellation of new home price limit policies.

For example, on July 31, Zhengzhou issued a document to cancel the price guidance for commercial housing sales. Developers can set their own prices for sales or go through the pre-sale (sales) permit registration procedures.

According to statistics from the China Index Academy, since the beginning of this year, cities such as Shenyang, Lanzhou, Zhengzhou and Ningde have clearly stated that they will no longer implement price guidance for the sale of new goods, that is, they have cancelled sales price limits.

Chen Wenjing, director of market research at China Index Academy, believes that since the second half of 2021, with the changes in the real estate market environment, the negative impact of the price limit policy has become more prominent. The price inversion not only increases the difficulty of buying houses for real housing needs, but also fails to reflect the real market situation, which violates the original intention of the policy; limiting the extent of price declines also leads to poor sales of real estate companies and hinders the return of funds. At the same time, in the past two years, regulatory authorities have repeatedly emphasized that the construction of "good houses" also requires matching policy support.

Chen Wenjing observed and analyzed that under the influence of multiple factors, various places have taken a series of measures to optimize the price limit policy. First, the cancellation of sales price limits in many places has allowed prices to return to the market, which is more conducive to companies creating good products that meet local housing needs and is a positive response to encouraging companies to build "good houses". Second, the cancellation of sales price limits will help companies to reasonably price and destock, help companies speed up the return of funds, and ease financial pressure.

However, some industry insiders believe that the removal of price limits is also accompanied by certain risks. Housing prices may fluctuate and market speculation may resurge. Therefore, the government, developers and home buyers need to take corresponding countermeasures. The government should strengthen market supervision to avoid malicious speculation; developers should set reasonable prices to avoid large fluctuations in prices; and home buyers should purchase houses rationally to avoid market volatility traps.

Li Yujia, chief researcher at the Housing Policy Research Center of the Guangdong Provincial Urban and Rural Planning Institute, believes that the cancellation of the price limit for new home sales has a dual impact. For developers, they can better use prices to promote sales and clear inventory. In addition, under the guidance of the government, if the price of new homes falls too much, the government should tighten the land supply in the area, and both construction and pre-sales should be slowed down.

For second-hand houses, a reference price can be established. When the market price is significantly lower than the reference price, the government will intervene. The main purpose is to avoid homogeneous competition among enterprises and guide enterprises to improve product quality.

In recent years, the central government and various ministries have repeatedly emphasized "stabilizing land prices, housing prices, and expectations." The price limit policy played an important role in stabilizing land prices and housing prices when the market was hot in the past. However, judging from the housing price trends of various cities, first-tier cities still face downward pressure in the short term, but housing prices are still supported and are expected to gradually bottom out and recover. Among second-tier cities, core city housing prices are expected to bottom out, and ordinary second-tier cities are still expected to reduce prices and promote sales, and the downward trend of housing prices may continue in the short term.

"Housing demand in third- and fourth-tier cities is being released slowly, and support for housing prices is relatively weak, so housing prices may continue to bottom out overall. Overall, the current bottoming out and stabilization of housing prices still requires continued policy efforts," Chen Wenjing believes.

Daily Economic News