Beijing Property Agent Lianjia Shutters Shops Amid Market Cool-Down

(Beijing) — One of China’s largest real estate brokerage firms, Lianjia, has shuttered 87 out of its 1,400 offices in the capital since March, when the Beijing government introduced its latest round of regulatory curbs in a bid to rein in skyrocketing property prices.

Lianjia, also known as Homelink, said in a written statement that the closures were part of a move to optimize its outlet network and strengthen its management. Lianjia’s main rival, 5i5j, has also been restructuring its outlet network in Beijing, but no specifics were given.

The move comes after Beijing’s municipal government brought in new controls in mid-March to tackle a housing bubble in the capital, introducing measures such as raising down-payment requirements, suspending mortgages with a payback period of over 25 years, and tightening the scrutiny of purchases by people who had filed for divorce — a method that some couples use to bypass mortgage rules when trying to buy a second home.

Prices of previously owned apartments, a major source of revenue for agents, fell 6% in April from its peak price a month earlier of about 676,000 yuan ($98,000) per square meter, an amount even higher than the annual disposable income of a Beijing resident in 2016.

Transactions also shrank by about 30% last month, further squeezing the market for real estate agents.

A crackdown on the sale of commercial units — mainly offices and shops — to individuals as residences also contributed to the property cool-down as did new regulations targeting the unruly school-area apartments, some of which have been divided into parts and sold separately to parents who wished to get their children enrolled into elite schools.

An earlier campaign, launched in June, to prohibit first-floor apartments from being turned into shops has also influenced property agencies. Some outlets of these firms were located in such units simply by pulling down the wall facing the street.

Thirty-four of the 87 Lianjia closures were due to misuse of first-floor apartments, while 44 were in residences turned into commercial property, and nine were in school areas.

As the Beijing property market changes, real estate brokerages and property developers look to restructure their operations, one executive at a property agency in Beijing who asked not to be named told Caixin.

But the closure of outlets is seen as common practice in the real estate market, as closing outlets stores and firing agents is seen as a cost-effective option when the market isn’t thriving, some industry watchers say. After the market recovers, it takes less than a week to reopen the branches, one property agent told Caixin.

Contact reporter Coco Feng (renkefeng@caixin.com)