(Yicai) April 1 — China’s foreclosed property market is heating up as the real estate sector shows signs of recovery, with some judicial auction homes selling at significant premiums, reversing last year’s trend of falling prices and transaction volumes.
The renewed competition reflects improving sentiment in the housing market, particularly in core cities. Foreclosed properties are homes forcibly sold through court-ordered auctions, which previously often transacted at steep discounts to market prices.
A 198-square-meter foreclosed home in Changzhou, Jiangsu province, was recently sold for nearly CNY4.4 million (USD639,190), 122 percent above its starting price and 55 percent higher than its assessed value of CNY2.8 million, according to the Alibaba Asset Trading Platform. The transaction price equaled CNY22,200 (USD3,225) per square meter. Data from KE Holdings showed the average listing price in the same residential compound was CNY26,700 per square meter as of February, while the average transaction price was about CNY18,900 per square meter.
Premium Auctions Reappear in Core Cities
The trend is also evident in major cities. A foreclosed home in Shanghai’s Xuhui district was sold for CNY50.7 million (USD7.4 million) on March 16, 63 percent above its starting price of CNY31.1 million and 14 percent higher than its assessed value of CNY44.4 million.
Other auctions in Changzhou also attracted strong bidding. A 138-square-meter property sold for nearly CNY2 million on March 18, 62 percent above its starting price, while an 88-square-meter home sold for CNY965,000 on March 10, more than 55 percent above its starting price.
Transaction activity has also improved in major cities. In the fourth week of March, the transaction rate of foreclosed homes reached 71 percent in both Beijing and Shanghai, with average premium rates of 16.2 percent and 17.3 percent, respectively. Shenzhen recorded a transaction rate of 62 percent, with the average premium rate exceeding 20 percent, according to Alibaba Asset Trading Platform data.
Recovery Uneven Across City Tiers
Industry observers said the improvement is closely linked to a temporary rebound in China’s existing home market.
“Current housing prices in some core cities have entered a temporary bottom range. Market expectations have stabilized, and buyers are becoming more willing to enter the market, which has boosted activity in the foreclosed property sector,” said a person who has long tracked the market.
“The simultaneous increase in the transaction rate and premium rate shows the market is no longer relying solely on price concessions to drive deals, but is seeing genuine competition,” the person said, adding that this typically signals improving market liquidity.
China’s foreclosed property market has undergone several years of adjustment and was particularly sluggish last year.
Data from the China Index Academy showed the market experienced declines in both volume and price last year. About 719,000 properties were listed for auction, down 7 percent from a year earlier, while 169,000 were sold, down 4 percent. Total transaction value fell 24 percent to CNY253.6 billion (USD36.8 billion), with the average discount rate at 74 percent.
Although the market is showing signs of recovery, structural divergence is becoming more pronounced.
The rebound is mainly concentrated in first- and second-tier core cities and high-quality locations, while third- and fourth-tier cities remain in an adjustment phase, industry insiders told Yicai.
Editor: Emmi Laine