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A photo taken on October 7, 2020 shows the Tencent building in Nanshan District of Shenzhen, in south China’s Guangdong province. Photo: Xinhua

Alibaba, Tencent lay-offs burst property bubbles in headquarters cities of Hangzhou, Shenzhen, sending prices plunging

  • Transactions and prices are down while second-hand listings are up in formerly hot districts such as Hangzhou’s Yuhang and Shenzhen’s Nanshan
  • Home prices in one prime neighbourhood close to Alibaba’s head office plunged nearly 28 per cent in 2022 after the company laid off thousands of workers

When Linda Wu, a product manager working at Alibaba, moved to Hangzhou several months ago, she was surprised to hear an agent press her to buy a house near her office at a “very low price”, rather than renting. The agent presented it as a “golden time” to buy, because many people who lost their jobs were unable to pay their mortgages and were putting their homes on sale at low prices.

A wave of job cuts among China’s giant technology companies has sent the home market reeling in neighbourhoods where waves of tech professionals – flush with high salaries and housing perks – drove prices upwards in recent years.

Areas in Hangzhou and Shenzhen, home to China’s biggest enterprises such as Alibaba Group Holding, Tencent Holdings, and Huawei Technologies Co, once seemed impervious to the troubles that have plagued the broader housing market in China over the last couple of years.

For example, proximity to Alibaba’s headquarters made Future Science Town in Hangzhou’s Yuhang district a property hotspot in the city in recent years, despite its location 45 minutes by subway from the city centre.

Staff members walk near Alibaba Group Holding’s headquarters in Hangzhou, in China’s eastern Zhejiang province on May 27, 2022. Photo: AFP

But home prices have plunged in the area since June, linked to massive lay-offs at Alibaba, which let about 10,000 employees go in the second quarter, according to financial reports.

Second-hand home prices in Yuhang district dropped by about 15,000 yuan (US$2,150) in the last several months, two local agents told the Post, citing the job cuts as one factor.

Home prices in one prime neighbourhood once hit 83,000 yuan per square metre, but the figure fell nearly 28 per cent to 60,000 yuan in 2022, according to a local agent website.

Meanwhile, the volume of second-hand homes listed for sale on one property-agent website increased for the ninth consecutive month in September.

Social-media posts also back up the trend, with laid-off technology professionals lamenting their inability to keep paying for their homes.

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In addition to Yuhang, areas such as Beijing’s Zhongguancun in Haidian district and Shenzhen’s Nanshan district have had relatively high housing prices in recent years, said Jinfeng Shi, an analyst at Credit Suisse. “But we can see those once hot areas cooled down [in 2022].”

In Shenzhen, home to Tencent and Huawei, residential home transactions dropped nearly by half in 2022 compared with 2021, said Alan Cheng, Centaline Property Agency’s CEO for southern China and general manager in Shenzhen, who blamed the overall downturn in the economy as well as the slowdown among technology companies.

Tencent cut some 7,300 jobs between April and September.

Over the past two decades, the booming technology sector brought these cities rapid industrial development, huge economic growth and an influx of white-collar workers with high salaries, Shi said.

The ranks of professionals in the software and information technology sector swelled to 8.08 million in 2021, with the yearly average salary hitting 200,000 yuan, according to data from the National Bureau of Statistics.

11:05

China housing: Can the world’s biggest housing market boom again?

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Well-paid workers flocked to the cities and settled down where the big companies are located.

“Many senior colleagues who earned good salaries over the past decade like Nanshan district as a home destination,” said Nicole Bai, a Tencent employee. “There are a batch of reputable schools, good hospitals, and definitely, very close to their workplaces.”

Meanwhile, technology companies provided their staff members with various housing benefits. A plan rolled out by Tencent in 2021 offered interest-free loans of up to 900,000 yuan for eligible employees to buy first homes locally. Its peers including Alibaba and Huawei have provided similar perks, such as low-price flats and discounts on home purchases.

“All these factors made these relatively wealthy professionals a major force of consumption, and pushed up local housing prices over the years,” Shi said.

With developers facing a debt crunch and leaving many housing projects unfinished, the past few years have raised doubts about the benefits of buying a home among would-be buyers across China.

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Indeed, the percentage of Chinese citizens wanting to buy a home fell to 16.1 per cent in the fourth quarter in 2022, a 10 per cent drop compared with the third quarter, according to a People’s Bank of China survey released in late December.

Now even tech professionals are part of that change.

“At this time point, the uncertain career prospect makes us dare not think about purchasing a home,” Bai said.

The so-called middle-class group will review their personal balance sheets and their need for an expensive home, said Credit Suisse’s Shi. “They might change their consumption behaviours and investment strategies.”

For example, the Hangzhou agent who talked about a “golden” time to buy failed to convince Wu. “I had considered buying a home in Hangzhou,” she said. “But now I would think twice, because you never know if you will lose your job tomorrow.”

The frosty market will take time to thaw, despite a series of supportive measures rolled out in recent weeks, Shi said. “The turning point may take place in the second or third quarter, with the policies gradually playing their role afterwards,” he said.

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