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our reporters zhuang linghui and lu zhikun report from beijing

following a decline in february and june this year, the monthly volume of foreclosed properties across the country fell again in august this year.

recently, data released by various sources showed that in august this year, the number of newly listed foreclosure homes nationwide was about 38,000, a month-on-month decrease of about 5%. at the same time, the transaction price of foreclosure homes has also dropped recently, driving up the transaction rate in many places, and the transaction rate in some cities has exceeded 30%.

china business news reporters noted that since the first half of this year, the scale of foreclosed properties has shown signs of decline, and the cumulative listing volume has declined year-on-year for two consecutive months until july this year. however, even after a continuous correction, the current national foreclosed property listing volume is still at a historical high.

"as the transaction volume of new and second-hand houses continues to shrink and housing prices continue to adjust, it is expected that the overall transaction rate of judicial auction houses will continue to remain at a high level of around 20% in the future." ma qianli, director of market research at cric research center, said that it is expected that judicial auction houses will occupy a larger market share in the low-priced segment where the market is less popular and more price sensitive.

the scale of auctions has dropped again

since the first half of this year, the number of foreclosed properties listed for auction has shown a downward trend nationwide.

monitoring data from the judicial auction database of china index academy shows that in the first half of 2024, the total number of various types of judicial auction properties listed for auction in the national judicial auction market was 382,000, a year-on-year decrease of about 1.1% from the first half of 2023; in the first seven months, this number was 446,000, a year-on-year decrease of about 3.5% from 462,000 in the same period of 2023.

this trend became more obvious in august this year. according to cric data, the number of newly added foreclosed properties listed for auction in the typical cities it monitored was 37,676 in august this year, a 5% decrease from july.

it is worth noting that this is the third time this year that the number of newly listed properties has declined in a single month. overall, in january this year, the number of foreclosed properties in key cities across the country reached its peak this year, exceeding 40,000 units. after that, the number of listed properties fell below 30,000 units in february this year, but it did not continue. since march this year, the number of foreclosed properties in the corresponding cities has been above 30,000 units. in june, the number of listed properties fell slightly, but it was still about 34,000 units.

despite the correction, the number of foreclosed properties in key cities across the country is still at a historical high. according to cric data, in the first eight months of this year, a total of 280,000 foreclosed properties were put up for auction in key cities it monitors, an increase of 12% over the same period in 2023.

in terms of cities, in august this year, the scale of judicial auctions in central and western cities such as chongqing, zhengzhou, taiyuan and chengdu was relatively prominent, with more than 800 new judicial auctions in the month, of which chongqing ranked first with more than 1,000. the number of new auctions in the four first-tier cities was relatively small, all below 350, with less than 200 in shanghai and beijing.

"the emergence of a large number of judicial auction houses has formed a direct competitive relationship with new and second-hand houses on the supply side." ma qianli pointed out that the supply and demand of judicial auction houses have reached new highs in recent years. in 2023, the transaction amount of residential judicial auction houses nationwide reached 150 billion yuan, a year-on-year increase of 10%. among them, the supply of judicial auction houses in sichuan, guangdong, henan and other provinces is at the forefront, bringing a series of changes to the local market.

increased transaction rate

while the scale of the market has been adjusted downwards, the transaction rate of foreclosed properties has increased in many places.

according to cric's sampling survey data, in august this year, 37,676 judicial auction houses were listed for auction in its key monitored cities. excluding those that have not yet started or are in progress, the effective auction volume was 9,572 houses, 1,835 houses were sold, and the average transaction rate was 19.2%, up 2.4 percentage points from july.

looking at the cities, in august this year, the transaction rate of foreclosed properties in shanghai, shenyang, xiamen, chongqing, jinan, nanjing, beijing and other cities was relatively high, all exceeding 30%.

among them, chongqing had a high supply of judicial auction houses in august, with 1,158 houses listed for auction that month. however, excluding those that have not yet started or are in progress, the effective auction volume was 261 houses, of which 138 were sold, with a transaction rate of 41%. in addition, a few cities such as shanghai, shenyang, and xiamen had a transaction rate higher than chongqing, with shanghai's transaction rate reaching 50%. however, the effective supply in these three cities was lower than that in chongqing, and the actual number of houses sold was less than 60.

from the perspective of transaction prices, the continuously falling transaction prices have made judicial auction houses more competitive, and have also become the main driving factor for the increase in their transaction rates.

generally speaking, the auction process of judicial auction houses is basically divided into the first auction, the second auction, sale and re-auction, etc. the first auction starting price discount rate (auction price/assessment price) is between 0.7-10%, and the second auction is 0.8% of the first auction starting price, that is, the starting discount rate is between 0.56-0.7%.

"a large proportion of foreclosed properties will be put up for auction again after failing to sell." ma qianli pointed out that incomplete statistics from cric showed that among the 280,000 foreclosed properties put up for auction in the first eight months of this year, about 103,000 properties were auctioned twice or more, accounting for nearly 40%.

"in terms of discount rate, there are also large differences between properties sold at the first auction and those sold at the second auction." ma qianli said that generally speaking, the average discount rate for properties sold at the first auction is 69%, while that for properties sold at the second auction will drop to around 63%. properties sold at the second auction have a greater discount and a relatively higher sales rate.

according to cric data, in august this year, the average discount rate of the starting prices of foreclosed properties in its key monitored cities was about 71%, of which about 16% of foreclosed properties had a discount rate of 60% or below. the transaction rate of such properties reached 33%, which was significantly higher than the average transaction rate of less than 20% in that month.

"highly cost-effective judicial auction properties are very attractive." ma qianli predicts that judicial auction properties may occupy a larger market share in the future, and this structural feature will be more obvious in cities such as hangzhou and suzhou where the proportion of low-priced supply is relatively low.

(editor: lu zhikun, reviewer: tong haihua, proofreader: zhang guogang)