With an occupancy rate of 120%, more and more new houses are emerging. Will a new round of "price wars" be on the horizon?

On September 21st, Longfor Yuhu Jing in the high-speed rail new city section of Suzhou launched its first opening event, offering 191 units with prices ranging from 3.19 million to 9.89 million yuan.

This project is defined as the first fourth-generation pure foreign house community in Suzhou. Shortly after the first opening, the developer released a poster: the sales amount reached 450 million yuan.

One reason for the hot sales is that the project achieves an actual maximum floor area ratio of 120% through the method of gifting area.

A marketing executive from a TOP10 real estate company in Shanghai recently told media outlets such as "Daily Economic News" that in the current intense market competition, developers hope to empower their products through similar methods to demonstrate the project's advantages in competition with surrounding products. "For homebuyers, in the same location, if we do 'fourth-generation residential', while other projects do not, it will be easier for us in terms of sales."

Floor Area Ratio 120%

Longfor Yuhu Jing is developed and operated by Suzhou Huxin Real Estate Co., Ltd. According to Tianyancha, the project company is a joint venture established by Longfor Group, Suzhou High-speed Rail New City State-owned Investment Holdings Group, and Suzhou Rail Transit Group, with ownership stakes of 51%, 39%, and 10% respectively. The project has released a total of 5 residential buildings, with an overall recorded average price of 33,000 yuan per square meter.

It is worth mentioning that the newly launched three types of units all have large terraces, including high-ceiling sky courtyards, with the maximum usable area increased by 62 square meters.

In fact, before this project, Suzhou had already launched the Su Di 2023-WG-31 and 61 plots, planning to create the first "fourth-generation residential" project in the main urban area, with a maximum floor area ratio close to 120%. The project's highlights also involve gifting sky gardens, introducing courtyards and vegetation into the air, achieving the effect of every household having a sky courtyard.

Deqing, Zhejiang, auctioned a residential land in July this year, with clear rules stating that the plot should be developed as "fourth-generation residential", with a total of 13,800 square meters of sky courtyards planned, and this part of the sky courtyards' area may not be included in the plot ratio.

According to the Real Estate Industry Association of Nanhu District, Jiaxing City, since the beginning of this year, in new residential land releases in cities such as Wenzhou, Huzhou, and Jinhua, some "capacity calculation new rules" have emerged successively. As long as real estate companies use the new rules for reasonable design, theoretically, they can achieve a floor area ratio of 100%, and even as high as 120%.

For example, in the core area of Taohua Island unit plot auctioned by Wenzhou on July 22nd, features such as "sky garden gifting", "duplex residences", and "ultra-high floor area ratio" are concentrated, with very large design spaces. In a plot auctioned by Yiwu on June 26th, high-rise residences are allowed to build sky garden balconies (not included in residential balconies) and public shared platforms. Apart from the green area, the sky garden balcony is calculated at half the projected area of the structural base plate for the plot ratio, and the sky shared platform is not included in the plot ratio The deputy director of research at the China Index Research Institute, Xu Yuejin, stated that the concept of "fourth-generation residences" has emerged in various places, also known as "three-dimensional ecological residences" or "urban forest garden residences". The main feature is to place courtyards on the ground floor of high-rise buildings, allowing each household on every floor to have access to public courtyards and independent gardens.

However, the adjustments in various local policies only target certain rules, which does not necessarily mean the complete elimination of shared space. In the future, more cities may follow suit and introduce similar policies.

Will second-hand homeowners have to further reduce prices?

"In fact, this is a signal of policy relaxation for developers." The above-mentioned marketing director of a real estate company believes that in the past two years, real estate companies have been competing more and more finely in terms of property quality, public area facilities, and underground parking lots. Each company is striving to ensure that their properties are marketable and cater to the new mainstream buyer group in the "existing stock era" to quickly sell and turnover.

In Xu Yuejin's view, compared to previous residential products, "fourth-generation residences" have certain advantages. Real estate companies should strengthen the research and development of new-generation residential products, utilize the positive impact brought by adjustments in capacity rules, enhance the attractiveness of residential products, and better meet the market demand for improved housing. The emergence of new products always diverts customers from old products.

According to Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, as of March this year, 24 provinces nationwide have piloted the launch of "fourth-generation residences", equivalent to over 70% of provinces nationwide fully implementing "fourth-generation residences". In 2022, the first fourth-generation residence in Fujian, "Jianfa Manyun", was unveiled. Over the past two years, more than 30 "fourth-generation residence" projects have been implemented in Fuzhou.

This method of high giveaway area is equivalent to selling at a discounted price on the basis of house prices. Li Yujia believes that the large-scale entry of new-generation residences into the market may reduce the low-price advantage of second-hand houses, forcing second-hand homeowners to further reduce prices and engage in a comprehensive "price war" with new houses. In addition, land plots sold before the introduction of new building regulations and newly developed projects may face more challenging sales.

He further mentioned that similar industry adjustments need to pay attention to maintaining the continuity, stability, and predictability of policies; consider the externalities of policies, especially the impact on ongoing and for-sale projects, as well as on second-hand homeowners; and not use the pretext of high-quality development to engage in the actual practices of "protecting land sales" and "protecting the scale of new houses".

Daily Economic News, original title: "More and More New Houses with a 120% Occupancy Rate, Will a New Round of 'Price Wars' Come?"