Cheap Pre-Owned Homes Made About Half of Sales in Beijing, Shanghai in October

Second-hand houses priced below CNY2 million (USD278,600) have become the main target of young buyers and investors in first-tier cities, accounting for about half of the total pre-owned home sales in Beijing and Shanghai.

More than 57 percent of the second-hand apartments sold in Beijing in October were priced below CNY2 million, up from 55 percent the previous month and nearly 53 percent a year earlier, according to monitoring data from China Real Estate Information Corporation.

In Shanghai, almost 49 percent of pre-owned home sales last month were of properties priced below CNY2 million, compared with over 46 percent in September and nearly 40 percent in the same period last year, CRIC data also showed.

The popularity of small second-hand houses in first-tier cities is because they meet the needs of young first-time buyers, said Cao Jingjing, general manager of the index research department at the China Index Academy. “Young people who have just started working have limited funds, and the prices of such properties are relatively low, which will not impose excessive financial pressure on them.”

Most properties below CNY2 million are located in areas that boast convenient commuting and mature living facilities, with easy access to large shopping malls and comprehensive medical facilities, making them highly favored by first-time homebuyers, she noted.

The pre-owned house market is experiencing continuous adjustments, with prices further declining. This has not just opened opportunities for young buyers, but also for wage-earning families who can now afford second-hand homes in prime locations.

The price index of second-hand residential properties in first-tier cities in October fell 1 percent from September and 4.5 percent from a year earlier, according to data from the E-House China Research Institute.

Meanwhile, as housing prices continue to decline, the rental yield of second-hand homes in some areas of first-tier cities has gradually recovered. This has attracted investors, who purchase low-priced second-hand properties to rent out.

The average rental yield in 50 key Chinese cities rose to 2.08 percent in the first half of this year from 2.06 percent last year, mainly because the magnitude of housing price adjustments was greater than that of rental price adjustments, according to data from the Linping Residential Big Data Research Institute.

A real estate agent in Beijing's Chaoyang district told Yicai that 15 to 20 second-hand apartments are sold every month in the community he manages. Many of the new owners rent them out because, after deducting various costs, the overall rental yield of apartments in this community has recovered to around 3 percent to 4 percent, he added.

Properties with a rental yield of more than 3 percent, or even around 4 percent, are still relatively rare, Lu Wenxi, market analyst at Shanghai Centaline Property Agency, told Yicai. However, against the backdrop of continuously declining housing prices, some older properties may have relatively attractive rental yields due to larger price drops.

Lu warned that, as high-quality houses remain the favorite ones among buyers, the potential price appreciation of older properties is very limited. A high rental yield does not necessarily translate into better long-term investment returns, he explained.