Rumors have been circulating in the Shenzhen real estate market that second-hand home reference prices may be adjusted. On April 20th, real estate agents were busy spreading the news, with some even celebrating homebuyers signing contracts before the alleged changes.
The online rumors suggest that banks will now determine home prices based on the lower of the contract price and the appraised value, with the second-hand home reference price only serving as a reference. However, Shenzhen's Housing and Urban-Rural Development Bureau has not officially confirmed these changes, nor have they published any information about the cancellation of second-hand home reference prices on their website.
When reporters inquired with major banks, including China Construction Bank, Bank of China, and China Merchants Bank, they received mixed responses. Some loan managers stated they had not seen any official documents, while others indicated that changes were indeed taking place.
The Shenzhen real estate market has been impacted by second-hand home reference prices since their introduction in February 2021. While there have been previous rumors of adjustments, none have been officially confirmed. Nevertheless, the influence of these reference prices on the market has been significant. Data from Leju Research Center shows that at the end of last year, more than 40% of Shenzhen's housing transactions were below the reference price, with nearly 85% trading close to the reference price.
In 2022, second-hand residential transactions in Shenzhen declined by 46.7% compared to the previous year and by 77.2% compared to 2020. Although there was a slight market rebound in March, the trend slowed in April.
As the first city in China to implement second-hand home reference prices, Shenzhen has been followed by nearly 15 other cities, including Shanghai, Beijing, Guangzhou, Xi'an, and Dongguan. Despite the gradual relaxation of related policies, most cities have seen their reference prices become obsolete.
Li Yujia, chief researcher at the Guangdong Urban Planning and Design Institute's Housing Policy Research Center, says Shenzhen's real estate market is in a difficult situation. Adjusting the reference price upward could stimulate the market and conflict with the "housing is for living, not speculation" policy. In contrast, lowering it would confirm falling housing prices, leading to further declines in expectations.
Li suggests that Shenzhen maintain its current reference prices and adopt flexible measures in their implementation, such as banks determining mortgage appraisal prices based on the lower of the reference price and contract price. This approach could bring appraisal prices closer to market prices while avoiding the creation of a downward spiral in housing prices.
