China’s Slumping Real Estate Market Hits Agencies Hard

China’s 60,000 real estate agency offices are expected to post a total loss of ¥3 billion ($475 million USD) in 2011, or ¥50,000 ($7,923 USD) per office, as limits on the number of homes a person or household can own take their toll on the market, Home Link, a Chinese second hand property service provider, estimates.

Beijing, will be the hardest hit as trading of second hand properties in the city plummeted to around 100,000 units this year, down from 190,000 in 2010 and 250,000 in 2009, Home Link went on to say to the media. Overall home sales volume in the country’s capital has fallen 23 percent year on year, to a 10-year low.

Real estate offices in Beijing currently sell 1.5 residences per month on average. Given that an average second hand apartment in the Chinese capital is sold for ¥2 million ($316 million USD), and the commission is 2%, an average real estate office can expect to take in only ¥60,000 ($9,500 USD) per month, much lower than the ¥100,000 ($15,8000 USD) in expenses needed to run a typical 10 person real estate office.

Since property prices began falling earlier this year, closing down offices has been the most straightforward means for agencies to cut costs. On average 3.8 offices closed in Beijing every day, 70 percent of which are small and midsized industry players. The massive closures have reduced the number of real estate offices in Beijing to 4,500, down from 6,000 in 2009, Home Link noted.

Shanghai is no exception. My Top Home, a minor real estate agency, told Yicai.com that it will shut all of its offices in Shanghai.

The company sold 182 apartments valued at a combined ¥270 million in Shanghai between January and November, accounting for merely 0.17 percent and 0.18 percent, respectively, of the market. It sold ¥400 million worth of apartments in the city both last year and in 2009.

The number of real estate offices in Shanghai now stands at 6,000, down 40 percent from the peak. The top 10 agencies have 900 offices and are responsible for just 30% of all second hand home purchases.


People also view

Leave a Reply

Your email address will not be published. Required fields are marked *