Gold bars, new cars and mobile phones are among the incentives being offered to potential homebuyers by Chinese property developers as they grow increasingly desperate to boost sales.
Huafa Tianfu, a developer in the eastern city of Hangzhou, has been offering up to a kilo of gold bullion to tempt people into buying its flats.
According to local media reports, the amount of gold ranges from 700g of gold for an 89 sq metre flat, to just over 1kg for a 100 sq metre apartment. Property prices in the development range from 2.2m yuan (£245,500) to 2.5m yuan.
The promotion does not state the purity of the gold, but if it were 24 carat the 1kg bar would be worth about 450,000 yuan, or 18% of the value of the accompanying flat.
Another developer in the city has launched a similar promotion, offering free decoration services, parking spaces, up to five mobile phones and a 10-year stay on management fees to prospective buyers.
The stunts come as developers struggle to rebuild confidence in a market that has been hammered by three years of economic pain. On Monday, the US bank Goldman Sachs said China’s property sector was likely to experience “persistent weakness” for years, especially in smaller cities.
After signs of a moderate recovery earlier in the year, property has slumped. In a survey of 40 cities by China Index Holdings, an independent real estate company, new home sales during the five-day Labour Day holiday in May were 22% below their pre-pandemic average. In third- and fourth-tier cities, sales were down by 42%.
Part of the reason that property developers are struggling to shift stock is that several cities, in an effort to stabilise the market, have banned developers from cutting prices. But investors do not expect such price floors to stay in place and predict property prices will fall, says Dan Wang, the chief economist in China for Hang Seng bank. “There is simply not enough demand to sustain high prices,” Wang added.
Young people, faced with a bleak jobs market, have been putting off home buying and other life milestones – such as marriage and children – that may necessitate moving out from their parents’ homes.
Another significant factor weighing down on the real estate sector, which makes up 20-25% of GDP, is the spectre of a property tax. In April the government announced that it had completed a national registration system for 790m properties, allowing it to figure out who really owns them.
The registration system is the first step towards a proposed property tax that would provide much-needed cash for China’s heavily indebted local governments. The policy has been piloted on mansions in Shanghai and Chongqing but technical – and political – barriers have previously prevented it from being rolled out more widely.
A property tax is a “nuclear weapon equivalent in housing markets”, said Wang, adding that it could cause house prices to drop by 50%. In China there is the added complication that it would expose the number of homes owned by government officials.
However, with the local government’s revenue stream from land leases drying up, many analysts see the tax as inevitable, making property a less attractive investment in the near term.
All this means that even the offer of solid gold is not enough to convince most would-be homebuyers. And several customers have complained that after buying a flat from Huafa Tianfu, their gold failed to materialise.
A sales representative for the firm told Chinese media that fluctuating gold prices made the bars hard to come by.