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Economy

Chinese are buying houses again, buoying economy

In central Beijing, 400 luxury condos sell out in a day

A condominium showroom in Beijing in July.

BEIJING -- A surge in condominium sales helped China's economy grow at a better-than-expected rate in the April-June quarter, raising questions over the circumstances inducing consumers to buy homes now.

The buzz surrounding property sales has become hard to ignore. An exhibition held early this month to show a new condo development in the Jiuxianqiao district in Beijing, known for its celebrity residents, drew a crowd of customers on a weekday. Although the price for the accommodation was 98,000 yuan ($14,000) per sq. meter, the condos are still attracting buyers. According to a sales assistant, "50 of the 400 flats for sale were sold in June alone."

In the capital city's Wangjing district, home to the tech company offices and advertisement agencies, the construction of a luxury condo building was underway across the street from the Beijing office of Alibaba Group Holding. Although the cheapest flat was listed for more than $930,000, "all 400 flats for sale were sold out on the first day," said a salesperson.

As sales for this condo development are limited to people working in Wangjing or to those who have household registrations in the district, prices are 10% to 20% lower than in neighboring areas. The seller merely sent an email to companies in the district and distributed related information on social networking sites, and high-paid employees flocked to it, according to the salesperson.

While the world braces for another economic blow dealt by a second wave of coronavirus infections -- U.S. banks are squirreling away billions to prepare for loans to fail in a recession -- China is also making moves to shore up its economy. The housing sector, and its various spinoffs, is seen as crucial to growth and local officials have reportedly begun to ignore restrictions to stimulate sales. This has led to a boom that helped its gross domestic product jump by 3.2% in the second quarter, outperforming most forecasts.

Zhao Xue, 24, a cram school teacher, bought a preowned 60 sq. meter condo in Shijingshan, Beijing, for 3 million yuan in April. With a down payment of 1.5 million yuan, she pays 9,000 yuan per month under a 20-year mortgage.

Zhao is earning more than 70,000 yuan per month but has no savings because "I like to spend money," she said. Advised by her parents, she bought the condo.

"I am looking forward to refurbishing the place to match my taste," she said. "The asset value of condos doesn't drop."

It was the price of the condo that enticed Zhao to pull the trigger on the property. "The price was several thousand yuan lower than last year because of the new coronavirus disease. I decided that it wouldn't fall any further," she said.

Zhao checked property prices when the severe acute respiratory syndrome, or SARS, broke out in Beijing early in the 2000s, finding that the prices had fallen at that time. "I was surprised to find out that history repeats itself," she said.

In 2003, following the rapid spread of SARS infections that April, the average price of newly built condos in China's capital plunged 40% in May compared with the previous month. But after the disease was brought under control in June, a housing boom began in the autumn, leading to soaring prices.

In the current pandemic, the price of existing condos rose 1.8% in May from the previous month.

Homes are selling fast in other cities as well. According to the National Bureau of Statistics, home sales across China fell 35% year-on-year in the January-February period but increased 16% in May.

Sales of furniture, home appliances and building materials, which inevitably follow property purchases, climbed back into positive territory in May.

"The real estate sector accounts for 20% to 30% of (China's) gross domestic product, if ripple effects are included," a government economist said.

In China, real estate is commonly known as a form of "secret savings" for the country's economy, with the government stimulating the sector when the economy slows. Although Beijing officially maintains a cautious stance on such intervention to prevent a housing bubble, local governments, which are struggling with falls in tax revenue and employment, are discretely easing regulations on the sector.

This month, a long line of cars were parked along the road just off an expressway in Yanjiao, Hebei, located 40 km east of Beijing's Tiananmen Square. An ad reading, "Direct sale by the developer. House from 1970. 30% down payment" was hanging near the open trunk of a car. A man stood up from a folding chair and urged, "Why don't you see the home? You can buy it even if you don't a have household registration in Hebei."

A man offers a condo for sale at the roadside in Yanjiao, Hebei Province, in July.

The Yanjiao town office maintains strict restrictions on home sales as a result of previously soaring housing prices. Since 2017, the average selling prices per square meter have plunged by 40%.

Although homebuyers are required to have household registration in the province, behind the scenes, the requirement has been relaxed since April, said a person familiar with the matter.

As a result, homebuyers have flocked to Yanjiao from Beijing, purchasing 900 and 600 condo flats respectively in May and June, representing a sharp rise from average monthly sales of 130 units in 2019.

Yanjiao is an enclave sandwiched between Beijing and Tianjin. With condos priced relatively low in Yanjiao as it is in Hebei Province, the town has developed as Beijing commuters moved in. But the COVID-19 outbreak drastically changed the situation for commuters, with checkpoints set up for people entering the capital.

"I left home at 7 a.m. and reached my office in Beijing at 3 p.m." in March, said a company employee living in Yanjiao.

When Beijing was hit by a second wave of infections in June, people returning to Yanjiao had to go through more checkpoints. "I left my office at 6 p.m. and returned home at 10 p.m.," the employee said.

With the coronavirus outbreak changing the value of Yanjiao as a residential area, the local government made steps to relax regulations on home purchases.

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