As soon as the new interest subsidy policy was rolled out, young people in Hangzhou flocked to purchase properties in this area during the holiday.

As soon as October arrives, major property sectors are releasing a steady stream of good news and ramping up property viewings. There is only one sector that has barely made any noise at all, and that is Lin'an.

Lin'an's presence in Hangzhou's property market is largely limited to a few familiar properties that make the list when monthly reports are released. Apart from that, it barely causes any ripples at all.

But no one could have expected that Lin'an, which has long been a low-profile underdog, has seen a huge surge in transaction volume during this week-long National Day holiday. It is reported that within 7 days, 20 second-hand housing units were reserved in the Qingshanhu Tech City sector, while the old town sector recorded more reservations, reaching a total of 37 units.

Not only second-hand housing transactions, the new residential properties in the old town sector also registered 3 confirmed transactions during the National Day holiday (these are properties viewed via intermediaries, excluding transactions from unguided walk-in visitors). Qiu Suzhen, a realtor from the Deyou Beizi Ruyi store, stated that the number of transactions closed during the National Day holiday is close to the transaction volume that would normally take two-thirds of a full month to achieve.

Combined with the Mid-Autumn Festival and the autumn break, this is an extremely rare 13-day long holiday in Hangzhou, when half of the city's residents are out traveling, yet Lin'an still managed to sell 8 units per day. A daily sales volume of 8 units is higher than the total monthly transaction volume that many property sectors can barely hit. And the accelerating transaction momentum is still continuing.

01

The recent surge in transaction volume in Lin'an is largely attributable to the new 929 interest subsidy policy.

From the perspective of local realtors in the sector, the interest subsidy policy is almost tailor-made for Lin'an. According to regulations, starting from October 1st, households purchasing a residential property with a construction area no larger than 120 ㎡ and a total purchase price no higher than 1.5 million RMB can enjoy an annual 1 percentage point interest subsidy for a maximum period of 5 years.

Assuming a commercial mortgage of 1 million RMB, the interest subsidy policy can reduce the total cost for home buyers by nearly 50,000 RMB at maximum. At present, the criteria for identifying first-time home buyers under Hangzhou's interest subsidy policy has been clarified: identification is conducted on a district basis, recognizing property ownership rather than existing loans. That means even if you own a property or even have an outstanding mortgage in your hometown or other districts, as long as you do not own any property in Lin'an District, you will be recognized as a first-time home buyer and eligible for the interest subsidy policy.

To be honest, this identification criteria is much looser than expected. After all, what Lin'an has in abundance is properties with a total price under 1.5 million RMB and a floor area no larger than 120 ㎡. According to data from the Hangzhou Shell Research Institute, in the first 9 months of this year, a total of 1373 second-hand housing units in Lin'an meet the interest subsidy requirements, making it the district with the largest number of eligible properties across the entire Hangzhou.

A 50,000 RMB discount is nothing but a trivial fraction for buyers in luxury property sectors, but for Lin'an where most properties are priced at just around 1 million RMB in total, this is a very tangible reduction of financial burden.

Qiu Suzhen said that all clients think the interest subsidy policy is extremely favorable, as the calculated interest in the first few years is even lower than the provident fund mortgage interest rate. "Even for some relatively new second-hand properties whose listed price exceeds 1.5 million RMB, landlords will voluntarily cut the total price to below 1.5 million RMB in order to sell their properties as soon as possible."

With sellers willing to cut prices and buyers ready to purchase, the transaction process naturally speeds up significantly.

02

There are as many as 12 residential communities in Lin'an that closed more than 2 transactions during the National Day holiday.

The best-selling property is Yuexing Xingyuecheng, which recorded 5 reservations in 7 days, almost selling one unit per day. Previous high-volume transaction projects such as Zhongtian Junfu and Yuexing Xinghui Garden are also catching up in transaction volume.

According to data from Beike Zhaofang, during the National Day holiday, the number of property viewings for Yuexing Xingyuecheng, Zhongtian Junfu and Yincheng Qingshan Hub all exceeded 100 groups. Xingyuecheng and Zhongtian Junfu even recorded more than 300 viewings. A clear sign of surging transaction volume is the sharp increase in the number of property viewings.

Why is the market breaking out right now? Property prices in Lin'an have been declining for several years. Calculated from the peak point, the cumulative decline is around 47%. In the past two years, property prices have continued to decline slowly, but the margin of decline has been narrowing. When property prices keep falling, the waiting option is very valuable, so people are willing to hold off on purchasing. The existence of uncertainty will significantly increase the value of the waiting option, making home buyers tend to postpone their purchasing decisions.

But waiting comes with a cost. Buyers have to pay rent, the interest subsidy policy window is time-limited, the margin of price decline is narrowing, and the expected return from continuing to wait is dropping rapidly. A 50,000 RMB interest subsidy for a 1 million RMB mortgage is equivalent to an additional 5% discount on a 1 million RMB property. If buyers judge that the property price will hardly drop by more than 5% in the next year, continuing to wait will no longer be a cost-effective choice.

After all, most of the people who are rushing to buy properties in Lin'an right now are young people. Some are from towns under the jurisdiction of Lin'an, while others are migrant workers who come to work in Lin'an. For them, the interest subsidy is a very tangible preferential benefit.

Many large-scale residential complexes for first-time home buyers in Lin'an that were once driven up by property speculators in earlier years now have actual transaction prices falling to 8000-12000 RMB per ㎡, which is almost on par with property prices in counties across Zhejiang Province. Among the transacted properties, the proportion of units priced under 2 million RMB reaches 92-95%, with the vast majority concentrated in the 650,000 to 1.5 million RMB price range.

With the same budget, you can only buy a small, old and run-down property of 40 to 50 ㎡ in the core urban area, but in Lin'an you can pick relatively new properties of 80 to 90 ㎡ or even larger located along the metro lines.

This surge in transaction volume also proves that Lin'an does not lack real housing demand, which was only temporarily suppressed by the expectation of falling property prices in the past few years. The 50,000 RMB interest subsidy has not only boosted transaction volume, but also restored market confidence. Of course, whether Lin'an's property market can move from the "policy bottom" to the "market bottom" ultimately depends on whether the local industry, population and spillover demand from the West Hangzhou area can continue to provide sustained support.

The good news is that Lin'an is being rediscovered, and is being re-selected by young people.

This article is from the WeChat official account "Ceng Lou", written by Jiang Gongzi, and published with authorization from 36Kr.