Property swap scheme falls flat
• Bid to stimulate market fails as Chinese struggle to sell their existing homes
A campaign by Chinese authorities to encourage people to replace their old apartments with new ones is attracting interest but faces one major hurdle: the participants in the scheme are struggling to sell their current homes.
Flagged at a key political meeting last month, the campaign is meant to help cities across China offload their growing stock of new apartments and provide crucial cash flow to ailing developers. By May 6, more than 50 cities had launched their own versions of the “swap old for new” scheme, according to a private survey by China Index Academy.
But analysts, real estate agents and developers say buying interest in second-hand homes is limited, casting doubt over the success of the campaign and suggesting the property sector downturn in China has further to run.
“Some people have inquired we about havent the ’campaign, had any successful but so far transactions,” said Qin Yi, a property agent in Shanghai.
“The biggest problem is selling the second-hand properties.”
The swap scheme is the latest in a string of support measures China has taken since 2022 as it tries to breathe life into a sector that represented about a fifth of economic activity at its peak and remains a major drag on growth.
China has lowered interest rates and down-payments, and most cities have eased or removed purchase restrictions. A developer funding programme for project completion is also struggling to get traction.
Demand for new and second-home properties in China has been falling, especially in smaller cities, as would-be buyers worry that prices may drop further and that some developers would be unable to complete projects.
The number of both types of properties listed for sale has been growing. There were 395million square metres of new housing for sale in JanuaryMarch, up 24% year on year, the latest official data shows. New home sales stood at 189.42-million square metres in the same period, down 28% year on year.
In the secondary market, the number of properties listed for sale was 20 times higher than the number of transactions in April, according to a survey of 14 cities by Zhuge Real Estate Data Research Centre. Listings were up 294% year on year in Shenzhen, and 39% in Shanghai.
“Sales have been falling off a cliff,” says Ma Hong, an analyst at GDDCE Research Institution in Shanghai, who believes the swap programme will have a limited impact. “Very few people dare to buy a house. Absent more innovative tools, such as a property stabilisation fund, the downtrend will continue.”
About 96% of Chinese households already own at least one home. Before the market turned, the Chinese had for decades regarded apartments — especially the new, more modern ones — as the safest place to park their savings.
Most of the cities taking part in the scheme are asking buyers to put down a deposit for a newly built apartment, which they can take back in full after two or three months if they fail to sell their existing homes to finance the purchase. Cities are offering lower taxes and fees for the transaction if completed.
A property agent in the tech hub of Shenzhen, who only gave his surname, Zhou, said more than a dozen people have placed deposits, but that their homes “don’t seem to have sold yet”.
In Chongqing, a city of more than 30-million in southwestern China, which has piloted the scheme since February, an agent surnamed You said it “had no obvious effect” on demand.
One executive at a Chinese developer, who asked for anonymity, said their firm “had no interest in participating” because the second-hand market was “very bad”.