Provinces around China Accelerate Launch of Trials for “Existing Home Sales”

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Multiple provinces around China have launched pilot schemes for the launch of existing new home sale trials, as part of efforts to the restore the health of real estate markets in the wake of widespread debt woes amongst developers.

Ever since the National Housing and Urban-Rural Construction Work Conference (全国住房和城乡建设工作会议) held on January 17 this year stipulated that “existing houses can be sold if conditions permit”, multiple provinces around China including Shandong, Anhui, Henan, Sichuan and Guangdong have indicate that they will launch trials for the sale of existing homes.

The Ministry of Housing and Urban-Rural Development (MOHURD) stated that “stabilizing expectations, preventing risks, and promoting transformation” would be key focal points for real estate work in 2023. MOHURD also pointed out that “if conditions permit, existing home sales may be implemented, and those who continue to implement pre-sales must create appropriate responsibility systems for for fund supervision in order to prevent the misappropriation of funds, and cannot create new risk in relation to home delivery.”

The sale of existing houses and the pre-sale system for commercial houses involves the use of different pre-sale methods. Zhang Bo (张波), president of 58 Anjuke Research Institute, said to Securities Daily that because with existing home sales “what you see is what you get,” they are undoubtedly more popular with consumers than off-the-plan properties, and that this is reflected by the scope and share of existing home sales in 2022.

Data from the E-House Research Institute indicates that in 2022, the nationwide sales area for ​​existing homes in China was 160 million square meters, for a year-on-year (YoY) decrease of 2.3%. Although the sales data for existing homes dropped slightly, this performance was far better compared to the nationwide transaction area for ​​new commercial housing as well as ​​off-the-plan housing sales.

In 2022 the nationwide transaction area for ​​new commercial residential buildings dropped 26.8% YoY, while the sales area for ​​off-plan housing dropped 29.6%. By contrast, the existing home sales area as a share of the area of all new commercial housing sales has risen from 9.5% in June 2021, to 10.4% by December 2021, and the further to 13.9% by December 2022.

Ye Yindan (叶银丹), researcher from the Bank of China Research Institute, believes that existing home sales can not only protect the rights and interests of consumers from infringement, they can also help to better regulate the quality and delivery standards of real estate companies, which in turn is conducive to “ensuring the delivery of buildings and stabilizing people’s living standards.”

“Especially for real estate companies, the existing home sales system helps to standardize their capital use, project operations and business operations, and prevent capital rupture and the spread of risk.

“In general, further trials of the existing home sales system will help to enhance market confidence and promote buyers who are waiting to enter the market faster, in order to spur the rewarming of demand.”