Guangzhou Anju Group has announced plans to acquired completed but unsold homes across the city within the next month for use as affordable housing, aligning with a nationwide push to reduce inventories in the housing market.
More than 50 Chinese cities have issued detailed guidelines for home acquisitions, with broadly similar requirements. Guangzhou Anju Group listed five criteria for eligible housing: clear asset liability and legal status, completion with joint acceptance certification, unit sizes under 90 square meters, unencumbered ownership or creditor approval if secured, and a preference for unsold, fully managed whole buildings or units.
As of October 2024, Guangzhou had 39,018 unsold homes with unit size below 90 square meters, accounting for 29.8% of its new home inventory, according to real estate research firm CRIC. In particular, Zengcheng district had 12,916 units such homes, the most among districts, followed by Baiyun and Huadu, each with over 5,000 units.
An insider revealed that Guangzhou Anju Group prefers state-owned enterprises’ projects over private developers.
This caution stems from the frequent defaults among private developers during the latest round of real estate crisis and the unclear timeline for housing price recovery, which poses risks for accountability, the source said.
The group has already conducted site visits for several local government-backed projects, the source said.
Housing buybacks require developers to submit project details, including property type, pricing, and rental estimates, which indicates that final transaction prices will likely involve negotiations.
Private developers, if considered, will likely weigh whether proposed prices are viable. SOEs tasked with acquiring the homes to be used for affordable housing, will have to hold the housing stock for a while, and given slim or negative profit margins, SOE may seek steep price discounts in order to minimize costs, said a person from a local SOE.
Guangzhou Anju Group, established in September 2023 with a registered capital of 30 billion yuan, is co-funded by Guangzhou City Construction Investment Group and Guangzhou Pearl River Industrial Group, both SOEs, each holding 65% and 35% stake. It aims to create a housing guarantee system covering public rental, affordable rental, and shared ownership housing. Guangzhou’s “14th Five-Year Plan” includes a target of building 660,000 affordable housing units, overseen by Guangzhou Anju Group.
Despite these plans, challenges remain. According to Guosheng Securities, high demand for affordable housing in Tier-1 and Tier-2 cities contrasts with relatively low inventory pressure and low rent-to-price ratios, reducing local government incentives for home acquisitions.
While the People’s Bank of China (PBOC) has provided 300 billion yuan of relending loans for affordable housing, the acquisition operations rely heavily on fiscal support from local governments, which can provide limited funds given the current financial condition and debt reduction pressure.
In some cities, buyback price caps have been set at less than 50% of comparable market rates and whether developers accept these prices is critical to the program’s success, said Huatai Securities.
Guosheng Securities also noted that high commercial and office vacancy rates could lead to a focus on smaller commercial units for buybacks rather than residential properties.