Even in the tech hub of Shenzhen, the Chinese real estate market is succumbing to chills

SHENZHEN, China, Nov. 29 (Reuters) – Life was good for Jerry Tang, who left his rural hometown in 2014 to become a real estate agent in Shenzhen – China’s tech mega-city and one of the hottest real estate markets in the world. world.

Just a few years ago, Tang could earn up to 50,000 yuan ($ 7,800) in a good month selling apartments. Last year, he was making around 15,000 yuan per month, but this year, it has fallen to around 5,000 yuan, and mostly comes from commissions on rentals.

“It’s definitely a lot harder to sell this year,” he said. “Buyers are waiting to see what happens with the market, while developers are strapped for cash, they are taking time to pay agents commissions.”

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In Shenzhen – home to 17.6 million people and businesses like gaming powerhouse Tencent Holdings Ltd (0700.HK) and telecommunications giant Huawei Technologies (HWT.UL) – some smaller real estate offices have closed. . Eight real estate agents Reuters spoke to also say at least a third of their colleagues have left the industry or are thinking about it.

Lianjia, a major real estate agent, plans to shut down a fifth, or about 100, of its offices in Shenzhen, financial information service Caixin reported in September, citing an internal memo. Lianjia and its parent company KE Holdings did not respond to requests for comment.

The lack of turnover in the Shenzhen real estate market and the fallout on the city’s real estate brokers are in part a result of deliberate political efforts by local authorities last year to make apartment prices more affordable, especially by requiring higher down payments for second homes and capping resale prices. .

But real estate agents are also saying so due to the current crisis of confidence plaguing the Chinese real estate industry, highlighting how badly the industry’s woes are reverberating. If Shenzhen – emblematic of China’s booming economy over the past 40 years – is not immune, then few places in the country are.

China’s real estate market, which accounts for a quarter of GDP by some measures, has come under unprecedented stress after policymakers introduced debt ceilings this year to curb excessive borrowing by developers.

This in turn helped lead to liquidity crises among developers such as China Evergrande Group (3333.HK), the world’s most indebted developer, and Kaisa Group Holdings (1638.HK). Both are also headquartered in Shenzhen. However, policymakers are generally expected to stand firm on new rules which are seen as a necessary reform.

New home prices in Shenzhen fell 0.2% in October from the previous month – their first decline this year – and are in line with the national average. It remains to be seen, however, whether real estate prices in Shenzhen will experience the most sustained, albeit still small, declines that have hit some second-tier Chinese cities this year.

In its favor, the economy of the tech hub of the south is not much smaller than that of the megalopolis of Shanghai, but Shenzhen only owns a third of the land, ensuring a strong underlying demand for apartments. .

“Buyers are concerned about Evergrande and the contagion, but in Shenzhen, they know other developers would step in to complete projects if they had to,” Tang said.

For some, the tougher restrictions and the ensuing real estate market chills are a sign that speculative buying – often rampant in China because there are traditionally few other investment options – may become a thing of the past.

“My parent’s generation could close their eyes and point out a place to invest their money and get a great return – they could play,” said Lisa Li, who works in the investment industry and recently bought a small studio. but found the nervous process. heartbreaking.

“Our generation cannot do this, we would be in trouble,” she said.

It’s cold comfort, however, for Tang, 30, who says he’s considering changing jobs.

“I need to save money if I want to find a girlfriend, and I support my mom around the house.”

($ 1 = 6.3836 Chinese yuan)

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Reporting by David Kirton; Additional reporting by Clare Jim in Hong Kong and Liangping Gao in Beijing; Editing by Ryan Woo and Edwina Gibbs

Our standards: Thomson Reuters Trust Principles.

Penny D. Jackson