China’s developers offer golden incentives to buyers

The bigger the purchase, the bigger the promotional incentives needed to attract buyers – and they don’t come much bigger than the gold bars promised by China’s property developers to would-be buyers of apartments. 

Background

The housing market in China has faced a liquidity crisis since mid-2021, with developers struggling to finish pre-sold apartments and to raise money to start new ones. Buyers have threatened to stop mortgage payments, and some banks are now offering mortgages that stretch across generations. 

The traditional economic approach of cutting prices to shift stock isn’t necessarily open to developers as several cities have banned that practice in an attempt to stabilise the market. One developer in Hangzhou is now reported to be offering 1kg of gold to people who buy a 100 square metre flat – which, depending on the purity of the gold, could be equivalent to 18% of the value of the flat, according to the Guardian. 

Other developers are taking a similar, if less headline-grabbing, approach, with offers of free parking spaces and waiving management fees for up to 10 years. 

Why it matters

• A weak housing market has a knock-on effect on demographic structure. Young people stay at home for longer, which delays life milestones such as marriage and children – and that stores up future problems for a country with an ageing and, in 2022, declining population.
• The housing market crisis also affects other sectors in various ways. Earlier this year, Yum China’s CEO suggested that price points are more crucial than ever in the fast-food sector, as a target audience of largely young people are saving to buy homes or rent flats.

Sourced from Guardian, Reuters, Nikkei Asia