Beijing launches second sale of “joint-ownership homes” in Shunyi

Beijing municipal government has started sales of a second batch of “joint-ownership homes”, allowing residents and non-locals to buy homes at less than half the market price.

Registrations opened on Friday for 969 units, comprising one and two-bedroom flats in the upmarket Shunyi district, home to the capital’s airport. The first batch of such homes in the scheme was launched in the city’s Chaoyang district a month ago.

The project will be developed by a subsidiary of state-owned BBMG Corporation, and will sell for 19,000 yuan (US$2,857) per square metre, compared with 50,000-60,000 yuan per square metre for privately-owned flats in the area.

The sizes will range from 46-74 square metres for the one-bedroom units, and 79-89 square metres for two-bedroom flats. Individuals will get 40 per cent of the ownership with the rest held by the government.

The scheme comes less than three months after the Beijing municipal government proposed a draft rule of the “joint-ownership homes”, promised to be China’s equivalent of what the UK market calls “shared-ownership” or “help-to-buy” properties, which allow residents to own portions, along with the government, essentially giving buyers the chance to get on the property ladder when they previously could not afford to.

‘Joint ownership’ allows easier access to Beijing property market

Such properties cannot be sold within five years of the purchase, and applicants should own no other homes. When selling, government has the priority to buy the individual’s share at market price and resell it to other applicants. Unlike previous government-subsidised homes, joint-ownership homes cannot be resold on the private market.

Illustrating the popularity and difficulty in accessing these homes, more than 120,000 applicants for the Chaoyang scheme, who passed the initial eligibility screening, went through a lottery process to split 427 units sold at 22,000 yuan per square metre, compared with 56,000 yuan per square metre of nearby private flats. Individuals get 50 per cent stake of the homes.

in Shunyi, 70 per cent of “jointly-owned homes” are open to people with hukou (household registration) in that district, or with hukou in other Beijing districts but who work in Shunyi; 30 per cent are open to non-Beijing hukou holders but who work in Shunyi. The Chaoyang project had the same criteria.

Some Beijingers complain the eligibility to such homes is too narrowly defined.

Wang Xiao, an internet company employee with hukou in Changping district, but who works in Chaoyang, said: “Very few people work in Shunyi. People like me can apply in neither group. I think any person with a Beijing hukou should be able to apply.”

He said he was also not sure if the resale price would reflect fair market price. “We can hardly bargain with government.”

There are also complaints that supply is too small, compared to the huge demand, and most are located in far-flung areas with scant amenities. But Beijing has promised to supply 50,000 such homes each year over the next five years.

Plunging Chinese rental yields point to property bubbles in major cities

Besides “jointly-owned homes”, the government has also intervened in the private market, restricting both land and home prices. The government sold 34 plots this year on the condition that developers pass on the benefits to buyers, according to Yahao Real Estate Selling & Consulting Solution Agency.

While the “joint-ownership homes” are claimed to shake the whole industry, observers say the impact of the new policy depends on the number of such homes available.

An earlier municipal land supply plan in April - “self-occupied homes” - vowed that 21.7 per cent, or 250,000 units of non-rental homes had to be “self-occupied”. Lianjia Research Institute, a subsidiary of the city’s largest property agent, estimated such homes will account for 2.8 per cent of Beijing’s home inventory by 2021.

Since demand is expected to come mostly from medium to low income households, analysts fear, low-end homes, mostly in secondary markets, could be negatively affected, while the new homes market, dominated by high-end products, would be left unscathed.

The past offers clues. Soon after the first batch of “self-occupied homes” went on the market in 2014, Beijing experienced a volume and price slump, as people had expected more supply.

“Self-occupied homes” was an earlier version of “joint-ownership homes” that stipulated 30 per cent of capital appreciation gain from sale after five years of holding had to be shared by the government, though such homes can enter the private market, unlike “joint-owned homes”. Beijing government has said the two tracks will emerge as one: joint-owned homes.

Zhang Dawei, an analyst with Centaline Property, said during the 2014-15 downturn, “self-occupied homes” had dragged down Beijing prices by nearly 10 per cent, but he is hopeful the new policy will strengthen the current “waiting-list” sentiment.

Beijing’s secondary home market has experienced a similar volume and price slump this year, following the 2014 depression. In the third quarter, existing home sales plunged 70 per cent over the same period a year ago, to 24,000 units, according to Centaline Property. Average prices dropped 4.8 per cent, compared with the historic high in March, to 63,000 yuan per square metre.

But the slump can hardly be attributed to “joint-ownership homes” alone. The market has been cooling down after the government introduced a barrage of austerity measures since March.

Besides, the government plans to build 500,000 units of homes for rental purposes over the next five years.

“The joint-owned homes, along with policies to encourage residential leasing market, will affect the medium-low end secondary market to some extent,” said a Centaline report. “But the primary market [new home market] will increasingly go high-end and will be rarely hit by the new policies, due to a shortage of land supply and longer period to build high-end homes.”