Sales of government-subsidised housing in Shanghai and Beijing have been disappointing because those who qualify for such flats cannot afford the high purchase prices, agents and property analysts say.
"The sales of affordable housing in Shanghai are not good because the qualifying salary ceiling is too low," said Song Huiyong, head of research at Centaline (China) in Shanghai.
"To qualify for the housing, the income of an applicant may not be more than 5,000 yuan (HK$6,160) a month. But the prices of those flats range between 600,000 and 700,000 yuan.
"Only people who earn much more than 5,000 yuan a month could afford to raise a mortgage to pay such a price, and so the people who qualify cannot afford to buy the flats," he said.
A property agent said: "We were appointed as selling agents of a subsidised housing project in Shanghai last year.
"We thought the units would be popular, as housing demand is strong and the prices of those flats are up to 30 per cent below prices of similar-sized houses in the private market. But sales have been disappointing and we have had to launch marketing campaigns to promote the project as we do for private housing estates."
Property agents said that given the weak response in the market, some developers built show flats and held events to attract home seekers to visit their projects. Some also offered refurbishment packages to lure buyers.
Location is another reason for the weak response. Centaline's Song said many affordable- housing estates were in suburban areas lacking sufficient transport links and social facilities.
"People in Shanghai are not willing to give up their small flats in the city centre for a bigger flat in the suburbs. It is more convenient to live downtown," he said.
Dickson Wong Hung, Centaline ( China)'s chief executive for the northern and southwest regions, said governments had focused on building more affordable housing rather than understanding the needs of buyers. "People are not willing to move into suburban areas as they lack social facilities," he said.
Last year, the supply of affordable housing reached 7.7 million square metres, with 110,000 flats in Shanghai. Alan Chiang Sheung-lai, the head of mainland residential property at consultancy DTZ, estimated 67 per cent of the flats had been sold.
"There were many affordable- housing projects released for sale in recent years, as the cities were aggressive in building the flats. But demand is low because there are restrictions based on buyers' income and assets."
Centaline's Song said the government had not promoted affordable housing to the public sufficiently. "There is also a lack of transparency in selling the flats. And they have failed to attract the target group," he said. Most would-be buyers were not from Shanghai, "but the government has restrictions on residential registration for [buyers]".