China’s real estate market is sluggish, and house prices have also fallen. (Image source: Adobe stock)
[See China News on December 21, 2021](See a comprehensive report by Chinese reporter Li Zhengxin) Chinareal estateThe market is sluggish, housing prices have also fallen, and many placesAbandon the houseIncidents have increased, leading to judicialauctionThe number of properties has surged.ChinaSupreme CourtIssue documents to intervene in the auction of such properties.
On December 20, according to the Chinese state media “Securities Times”, the Supreme Court issued the “Regulations on Several Issues Concerning the Qualifications of Bidders in Judicial Auction Real Estate by Courts”, which is China’s first systematic judicial auction house policy.
The document shows that from January 1, 2022, the judicial auction of real estate (foreign auction house) activities will follow the purchase restriction policy of the real estate location, and the published auction announcement stated that the bidder must be qualified to purchase the house. After the court has completed the judicial auction of the real estate, it shall review the eligibility certification materials submitted by the buyer, and the court that does not meet the qualifications shall not issue an auction transaction ruling. In addition, when the auctioned real estate cannot be disposed of normally, such as failed auctions, and the executor who does not have the qualifications to purchase a house and other parties request to use the house to pay off the debt, the court will not support it.
Zhang Dawei, chief analyst of Centaline Real Estate, said that foreclosure properties are generally about 10-20% cheaper than normal houses, mainly because there are some property rights defects or disputes, and most of them require full payment, which affects the buyers. After this upgrade of the purchase restriction, it is very likely that the value of foreclosure properties will continue to decrease, after all, local property purchase qualifications are still required.
Others in the real estate industry believe that this policy will fully include foreclosure property purchase restrictions, which will have a great impact on many people who want to bypass foreclosure property purchase restrictions. It is expected that after this upgrade of purchase restrictions, the value of foreclosure properties will continue to decline, and the foreclosure market may cool down more quickly.
According to a report from “Reuters” on December 20, Yan Yuejin, research director of the Think Tank Center of E-House Research Institute, believes that the review of the qualifications for buying a house has clearly defined the time point, that is, from the subscription to the final transaction. “Such policies will promote a faster cooling of the foreclosure market, and will also combat the phenomenon of real estate speculation in disguise through foreclosure.”
However, one thing that cannot be ignored is that China’s real estate market is sluggish, housing prices have also fallen, and the number of abandonment of houses in many places has increased, which has led to a sharp increase in the number of judicial auction properties.
According to data from the Ali Judicial Auction Platform, the number of foreclosures has soared from more than 9,000 in 2017 to 1.68 million this year. For example, as of 12 noon on December 14, the number of foreclosure properties in Shenzhen has reached 9,920, and this number is still increasing. Shenzhen has always been regarded as the bridgehead of China’s property market.
There are also reports from mainland Chinese media that a homeowner in Yanjiao, Sanhe, Hebei, purchased a house in 2017 with a mortgage for 3 million yuan. This year, because of business downturn, his house was auctioned off by the court for more than 900,000 yuan. After auctioning the money to the bank, he still owed the bank more than 1 million yuan. Coupled with the down payment and monthly payment paid before, it equals to 2.5 million yuan in compensation before and after, but in the end it ended up with nothing. The experience of this homeowner is not an isolated case. Recently, the number of foreclosures in Yanjiao has increased significantly.
According to a report by Radio “Free Asia” on December 16, a resident of Zhengzhou City, Henan Province, said: “I was really shocked that the number of foreclosure properties listed in Jinshui District of Zhengzhou alone turned out to be as high as 14,000. This is just In the small Jinshui District, the number of Zhengzhou as a whole is estimated to be astonishing. As a result, a group of new poor people have emerged in Zhengzhou.” The resident said that many local families have houses, cars and no deposits, and their lives are struggling.
“Watch China” special commentator Tang Xinyuan pointed out that the real estate decline this time will be different from the past because it faces many challenges. The Beijing authorities have raised the containment of the real estate bubble to the level of national strategy, directly controlling the supply of real estate credit, and there is almost no room for withdrawing relevant measures to “freeze” the property market. What is more unusual is that some local governments have introduced new regulations and issued “restriction orders” to control the decline in housing prices. Both investors and buyers and sellers of houses should be prepared for a much worse than expected economic downturn, more real estate developers’ bond defaults, stock market turmoil, and the abandonment of houses by buyers or speculators.
Tang Xinyuan believes that Chinese real estate developers are in a deep debt crisis, land auctions are rarely cold, and local governments that rely heavily on land finances cannot sustain their revenue. The Supreme Court issued a document to intervene in an attempt to push people with housing needs into the new housing transaction market, and this is related to the income of the local government.
Official data show that in 2020, China’s land sales revenue soared to a record 8.4 trillion yuan, which is equivalent to Australia’s gross domestic product (GDP) in one year.
According to data from the Ministry of Finance of China, local government land sales revenue and fiscal revenue accounted for 46% of the country’s fiscal revenue of 18.28 trillion yuan in 2020 and 84% of local fiscal revenue of 10.01 trillion yuan, compared with land sales revenue in 2019. The 40.3% of the national fiscal revenue reached a record high once again.
Record revenue from land sales has supported the revenue of local governments when the epidemic hit the economy. However, as China’s regulatory authorities have tightened credit support for private real estate developers, the demand for land by real estate companies has continued to decline.
Editor in charge: Xin He Source: Look at China
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