Wuhan now has an image outside China that it must dread but before the coronavirus took hold the capital city of Hubei province was one of the country’s most vibrant property markets.
In 2019, sales of new homes in the city reached 209,101 units, or 23.4 million square metres, an increase of 30.1% year-on-year. Residential prices in Wuhan were some of the highest in central and western China.
However, with the deadly outbreak, no one is in the mood to buy a new home. The city’s housing market – along with much of the rest of the country – is suddenly at a standstill. The fear is that house prices in some cities could go into freefall, torpedoing a sector that contributes as much as a quarter of China’s GDP.
In order to contain the outbreak, many local governments have suspended the sale of new homes, an activity which often sees a herd of homebuyers and agents crowding into showrooms.
With potential homebuyers either unable to view homes or too frightened to do so, many developers have closed their sales offices. Some have suspended construction altogether as well.
More tech-savvy agents have tried to refocus their efforts online. According to Tencent, many property brokers now offer virtual-reality technology so that prospective purchasers can visualise flats still in development from the comfort of their current homes.
Transactions are still few and far between, though. According to China Merchants Securities new apartment sales (in the 36 cities monitored) dropped 90% in the first week of February versus the same period in 2019. In the capital city Beijing – where usually property transactions typically number in the hundreds a day – they have fallen to single digits more recently, reported E-house China Enterprise, a research institute.
Real estate prices will inevitably come under pressure in the coming months. Take China Evergrande, one of the biggest Chinese property firms by sales, which said this week it will offer a 25% discount on all properties (including offices and retail space) for 1o days starting February 18. Evergrande has also launched a new online sales programme for potential homebuyers.
With the property market slowing to a crawl, some cities are considering new incentives to jumpstart sales. Earlier this month the local government in Wuhan announced a new preferential housing policy that allows frontline medical workers and hospital staff to borrow a maximum of Rmb840,000 ($120,321) from the housing provident fund – up from Rmb700,000 – when they purchase their first home.
Presumably a lot of these medical staff will be too busy at the moment to go house-hunting. But more optimistic analysts believe that the outbreak will do little to dampen demand over the long term. Others anticipate that the central government will further step up credit and monetary easing to support the economy once the epidemic is over. Pent-up demand for housing will bring back a pick-up in prices, they add.
Huang Yu from the China Index Academy told National Business Daily that the health crisis has only delayed housebuyers’ purchase plans. As the situation stabilises, she believes that demand will soon bounce back. “It’s still there, just delayed. The second half of the year is going to be a period of growth in the real estate market,” she says.
Tencent News agrees: “It [the virus] doesn’t mean that there is no need to buy a house, but that demand is now delayed. With the ongoing epidemic, the original plan to buy will be cast aside. But for most homebuyers, there is no rush to buy a house in the short term.”
In the meantime, a new drawback to not owning your own home has become apparent to renters. When residents of some cities tried to return to their apartments after the Chinese New Year holiday many found that they weren’t allowed access to their rental homes. To counter the spread of the outbreak, apartment complexes in cities like Suzhou, Wuxi and Yangzhou set up checkpoints, allowing only those with property ownership certificates to get through, Tencent News reported.
“Before I went home for the holidays, I didn’t expect the situation to be so bad so I didn’t even bring a change of clothes, thinking that I would go home right after the holiday,” one netizen from Suzhou fumed. “But after the second day of the New Year, we were told that we weren’t allowed to travel. My friends who went back to the city said that those who were renting weren’t allowed to go back home…”
“No matter what time, no matter where, if a house is yours no one should take away your right to go home. So I have to work hard, buy a house and give myself the freedom to go back home!” she added.
However, with such prospective sales likely months away, the Financial Times reported on Monday that officials in large cities like Shenzhen and Xi’an have told developers they can delay payments for land purchases and taxes; likewise restrictions on preselling unfinished properties will also be relaxed.
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