2024-08-23
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Under the downward pressure of the overall real estate market, "differentiation" has always been a frequently mentioned word. Major cities have also been divided into hot cities and non-hot cities for discussion.
As we enter 2024, market differentiation has further intensified, with varying degrees of popularity among cities and regional sectors.
As the market is deeply divided, many companies have begun to adopt the "improving quality and reducing quantity" and "production based on sales" model. Under this model, high-end and luxury housing projects in the core areas of hot first- and second-tier cities have played a crucial role as a "stabilizing force" to maintain market heat.
However, since June, we have seen that even the core areas of hot cities have begun to show improvements and high-end projects have been unsold. According to CRIC monitoring data, the average sales rate of 28 typical cities in the first half of August 2024 was only 26%, and the reasons for the unsold projects varied.
We believe that in the current market environment, as homebuyers’ requirements for quality increase, product competition in the mid-to-high-end market in core areas of hot cities will intensify in the future.
Since 2024, the market has entered a period of deep differentiation.The core areas of hot cities are no longer the only indicator of “hot sales”.
In this regard, CRIC Research Center selected 28 typical cities (Shanghai, Beijing, Guangzhou, Foshan, Shenzhen, Dongguan, Zhuhai, Hangzhou, Ningbo, Jiaxing, Nanjing, Wuxi, Xuzhou, Suzhou, Changzhou, Hefei, Wuhan, Changsha, Zhengzhou, Chengdu, Xi'an, Chongqing, Fuzhou, Xiamen, Jinan, Qingdao, Tianjin, Kunming) and analyzed their overall sales situation since January 2023. The results showed that: it basically showed a fluctuating downward trend, and the current average sales rate of projects was less than 30%.
According to CRIC monitoring data, the average sales rate of 28 cities in the first half of August 2024 was only 26%, which was basically the same as in July. From the trend point of view, from January 2023 to now, the overall sales rate has dropped from more than 35% in 2023 to less than 30% at present.The overall sales rate peak has also dropped from the high of 46% in 2023 to 29% in May 2024.
Specifically, the current sales of improvement projects in the new housing market are significantly better than the basic needs, and the hot projects that have "gone viral" from 2024 to the present are basically mid- to high-end products.
However, as the overall market heat has cooled, especially since June 2024, we have seen that properties in the core areas of some hot cities are also unsold, and the reasons for the unsold properties vary.
Judging from the typical unsold projects in 28 typical cities, most of the projects are caused by the large number of projects launched in the overall sector or region in the early stage of the project's launch, which consumes a large number of customers. Subsequent new projects entering the market will inevitably face a situation of a gap.
Take a project in Xi'an as an example. The project was launched on June 29, with an average subscription price of 27,154 yuan/square meter. 153 units were launched, but only 15 were subscribed in the end, with a sales rate of 10%, 34pcts lower than the average sales rate in Xi'an in July. The Central Innovation Zone where the project is located has always been the main area for new housing supply, especially since 2023, when the overall new housing supply has fluctuated around 15%.
The same problem also exists in Hefei's Binhu District. A project was launched on July 10, with an average subscription price of 31,844 yuan per square meter. 68 units were launched, and the final sales rate was only 15%.
As a hot spot in Hefei in the early stage, Hefei Binhu District has always been an area with high housing prices. However, with the downward market, it is inevitable that it faces insufficient high-end demand and is unsustainable.
In fact, due to the concentrated entry of high-end projects into the market, home buyers have a variety of choices. There is also a "cherry picking" situation in high-end projects in some core areas such as Shanghai, Beijing, and Nanjing. Some projects have high prices and no obvious discounts compared with surrounding competing products, resulting in customer diversion.
For example, a project in Nanjing is located in the core area of the Yuhe section in the south of the city, connecting the Hexi section in the south of the city. It has obvious location advantages and high customer recognition. It focuses on the new Chinese style, and has certain innovations in apartment design and fine decoration configuration. However, the additional product launched this time is a 176-square-meter high-end improvement product with an average discounted total price starting from 7 million yuan. The overall threshold is relatively high, and the customer base is severely diverted to the core sections of Daxiaochang and Hexi South, so the sales are poor.
There are also some projects that are located in core areas, but due to incomplete surrounding supporting facilities or obvious defects, their sales are poor.For example, a project in Shanghai has been built to meet near-zero energy consumption standards and has good quality, but the area was originally a traditional industrial area and there are currently obvious unfavorable factors such as wet garbage transfer stations around it. The planned Pudong District wet garbage transfer station has a maximum daily transfer capacity of 800 tons.
Another example is a project in Guangzhou, where the apartment is square and practical, the house ratio is high, the school district is decent, it is about 800 meters away from Gaotangshi Metro Station and the surrounding ecological environment is good. However, due to the average surrounding urban interface, lack of living facilities and lack of selling price advantage, the initial sales rate was less than 10%.
In addition to pricing and surrounding supporting factors, some projects also suffer from poor sales mainly due to soft reasons such as land defects and product design.In terms of product positioning, some high-end projects lack functionality and cost-effectiveness in their product design. A typical example is some projects in Xi'an, which have neither fourth-generation housing design nor price advantages. The projects are small in scale and the buildings are scattered, so the sales rate is relatively poor.
In general, for most cities where market enthusiasm has declined in the short term, the main reason for the sluggish sales of projects in the core areas is that a large number of high-end customers have been released in the early stage, and their purchasing power needs to be accumulated.Even in the current hot markets of Beijing and Shanghai, unsold projects are becoming common.
It is worth noting that for high-end improvement customers, the "picking the best" mentality is also quite obvious. They will comprehensively weigh factors such as the product's location, price, apartment design, etc., adjust their purchasing behavior or choose to hold on and wait and see, and therefore their requirements for products are gradually increasing.
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