© Reuters. FILE PHOTO: Buildings are seen in Shenzhen, China on September 18, 2018. REUTERS / Jason Lee
By David Kirton
SHENZHEN, China (Reuters) – Life used to be good for Jerry Tang, who left his rural hometown in 2014 to become a real estate agent in Shenzhen – China's tech metropolis and one of the hottest real estate markets in the world.
Just a few years ago, Tang could make up to 50,000 yuan ($ 7,800) in a month from home sales. He made about 15,000 yuan a month last year, but this year it has dropped to about 5,000 yuan and is mostly from rental commissions.
"It's definitely a lot harder to sell this year," he said. "Buyers wait to see what happens to the market, while developers are short on cash, taking the time to pay agents commissions."
In Shenzhen – home to 17.6 million people and companies like gaming powerhouse Tencent Holdings (OTC 🙂 Ltd and telecommunications giant Huawei Technologies – some smaller brokerage offices have closed. Eight real estate agents Reuters spoke to also say at least a third of their peers have left the industry or are considering it.
Lianjia, a major real estate agent, plans to close a fifth or about a hundred of its Shenzhen offices, financial news service Caixin reported in September, citing an internal memo. Lianjia and its parent company KE Holdings did not respond to requests for comment.
The lack of sales in the Shenzhen real estate market and the impact on the city's real estate agents are partly due to deliberate political efforts by local authorities over the past year to make house prices more affordable, including demanding higher down payments for second homes and capping resale prices .
However, real estate agents also say so because of the current crisis of confidence affecting China's real estate industry, and emphasize how much the sector's problems reverberate. If Shenzhen – symbol of China's meteoric economic rise in the last 40 years – is not immune, then there are only a few places in the country.
China's real estate market, accounting for a quarter of GDP by some metrics, has suffered unprecedented stress after policymakers introduced debt caps this year to curb developer over-borrowing.
This, in turn, has created liquidity crises for developers like China Evergrande Group, the world's most heavily indebted developer, and Kaisa Group Holdings. Both are also headquartered in Shenzhen. However, policymakers are generally expected to stick to the new rules, which are seen as necessary reforms.
Shenzhen new home prices fell 0.2% month-on-month in October – the first decline this year – and were in line with the national average. However, it remains to be seen whether Shenzhen property prices will suffer the more persistent, if still minor, declines that have hit some secondary Chinese cities this year.
In its favor, the southern tech hub's economy isn't much smaller than that of the other megacity Shanghai, but Shenzhen only has a third of the land, which ensures strong underlying demand for housing.
"Buyers are concerned about Evergrande and contagion, but in Shenzhen they know other developers would step in to complete projects if they had to," Tang said.
For some, the tougher restrictions and the subsequent slowdown in the real estate market are a sign that speculative buying – which is often rampant in China as there have traditionally been few other investment options – may be a thing of the past.
"My parents' generation could close their eyes and look somewhere to invest their money and get a big return – they could play," said Lisa Li, who works in the investment industry and who recently bought a small studio apartment. but the process is nerve-destructive.
"Our generation can't, we would get into trouble," she said.
However, that's cold comfort to Tang, 30, who says he's considering changing jobs.
"I need savings to find a girlfriend and I support my mom at home."
($ 1 = 6.3836)