Homebuyers tempted by small, older inner-city properties

Once shunned by the market, small and older homes, typically referring to secondhand properties in core urban areas with a history of over 20 years, are now gaining popularity in China due to improved affordability and favorable financing conditions.

Various regions have been implementing new policies from the central bank, including reduced down payment requirements, the removal of the lower limit on mortgage interest rates, and decreased housing provident fund rates, contributing to a faster turnover of small and older homes in the market.

In mid-May, a property located in an apartment complex in Chengdu's Jinjiang district, Sichuan province, was sold after being listed for just a single day, according to data from Beike, a real estate agent focusing on the secondhand market.

The apartment complex, constructed between 1988 and 2003, saw a remarkable surge in sales during May, with seven properties changing hands. While one property had an extended sales cycle of 254 days, the remaining properties were sold within a month.

There has been a noticeable increase in inquiries and transactions for small and older homes, said Chen Yingjie, an agent at Deyou, a real estate brokerage in Chengdu.

The availability of schools, transportation infrastructure and other supporting facilities in the vicinity contributed to the higher demand for these properties, leading to increased consultation and faster transaction cycles, Chen added.

"We have witnessed an influx of inquiries from individuals residing outside Chengdu who are seeking information about purchasing properties. Among these inquiries, a significant number originate from nearby cities surrounding Chengdu," he said.

Buyers from these neighboring areas are particularly interested in purchasing homes in Chengdu, with budgets ranging from approximately 1 to 1.5 million yuan ($137,000 to $206,000), Chen added.

According to monitoring data from Beike Research Institute's Chengdu branch, the proportion of secondhand properties priced below 1 million yuan continued to rise in May, indicating a positive trend in Chengdu's real estate market.

The proportion of properties priced between 1 million and 1.5 million yuan experienced a slight increase, reaching a relatively high level in the past year, suggesting a weak recovery state.

In terms of unit size, compact two-bedroom apartments covering 80 square meters or less and three-bedroom apartments covering 80 to 100 sq m each accounted for approximately 20 percent of the market share.

Besides Chengdu, in various first- and second-tier cities, including Shanghai, Guangzhou, Hangzhou, Dongguan and Kunming, data from Beike revealed a significant rise in transactions for small and older homes.

Notably, alongside the surge in transaction volume, the selling time for these properties has considerably shortened compared to the previously prolonged periods that could span over a hundred or even several hundred days.

Statistics from real estate agency 5i5j showed that the second phase of the Cuiyuan apartment complex in Hangzhou, provincial capital of Zhejiang, saw a record-breaking 16 transactions in May.

Last year, the residential area registered a total of 38 transactions, while as of May this year, the transaction volume has already reached 44 transactions.

Many aging residential communities in Hangzhou have seen a decline in the prices of secondhand homes, reaching levels comparable to those seen in 2017. These properties now offer a favorable cost-performance ratio, attracting buyers seeking affordable options in the real estate market, said Li Lin, an agent from real estate broker Lianjia in Hangzhou.

The appeal of small and older homes in core urban areas lies in their potential for value appreciation and proximity to prime locations, said Yan Yuejin, director of the Shanghai-based E-house China R&D Institute.

These properties often have the advantage of being situated in well-established neighborhoods with convenient access to amenities and transportation networks. Furthermore, their affordable prices make them an attractive option for buyers with limited budgets, Yan said.

While the immediate purchase of a small and older home may offer a cost-effective solution for buyers, there is also the prospect of future demolition and redevelopment projects, which could provide opportunities for capital gains. This potential for increased value adds to the allure of these properties for buyers, he added.