In the complex realm of China's real estate market, two prevailing systems tend to generate strong discontent among homebuyers: the presale system and the shared area systemThese frameworks are often viewed as harmful and skewed in favor of developers, despite their potential benefits.

The presale system has long been linked with the issue of unfinished construction projectsThough China’s property market previously experienced robust growth—allowing some incomplete projects to swiftly find new buyers—the systemic flaws only became glaringly apparent during periods of economic downturnIn the first half of 2023, the rate of unfinished projects in first and second-tier cities hovered around 5%, while in third and fourth-tier cities, it was close to 4%. Overall, the country faced an unfinished project rate of approximately 3.85%, resulting in an astonishing total area of about 231 million square meters of incomplete buildings—translating to around 2.31 million unfinished homes.

The implications are dire: 2.31 million homes equate to 2.31 million families grappling with despair after investing a significant portion of their life savings into properties that never materialized

Many have shelled out fortune after fortune in pursuit of ownership only to end up with a tragic tale of lossI am reminded of a cousin of mine who bought a Vanke apartment in Nanchang for over one million yuan, only to see it stand half-finished for yearsHis relentless pursuit of justice through petitions and complaints stretched over three arduous years, only recently culminating in news that they might finally receive their home.

The tale does not end thereA college friend faced a similar plight in Nanchang County, lamenting in his social media that he would do anything to secure a home in the city, only to be met with disappointment as his dream apartment remained incompleteThis raises the pressing question: How many families have been forced into despair due to a flawed presale system?

Under the presale system, developers acquire land and sell homes before construction, or sometimes even during the ongoing process of building

This reduces the initial capital required from developers and lowers the barriers to entry for the industry, thus flooding the market with real estate bubblesHomebuyers are left uncertain about the properties they are investing in, often discovering that their actual living spaces deviate significantly from initial promotional materials, resulting in substantial consumer lossesThe digits reflect the challenge: many homes being sold feature mismatched specifications that grossly undermine the buyer's interests.

Why do these issues persist despite their apparent unfairness? The grim reality is that these arrangements are highly favorable to developers yet disproportionately disadvantageous to buyersIn this intricate web of property development, the interests of developers consistently take precedence over those of the purchasers, fostering an environment rife with inequity.

This pervasive injustice is often hidden beneath the guise of “market economy,” where existence is rationalized

In years past, when the real estate market was booming, many sought-after properties required what is termed “tea money”—or undisclosed fees beyond the stated sale priceSuch blatant corruption has been shielded under the veil of supply and demand dynamics; developers pocketing these under-the-table fees raises critical ethical concerns.

The shared area system presents another bitter facet of the home buying experienceRecently, news emerged from Zhangjiakou in Hebei Province and Hengyang in Hunan Province announcing initiatives to promote “sales of completed homes” while gradually moving to abolish shared areasHowever, the abolition of shared areas does not imply the elimination of these spaces; rather, it transforms how homes are priced, shifting to a pricing model based only on the inner building area as opposed to the previous “inner area plus shared area” model.

Ironically, both the shared area and presale systems find their lineage traced back to Hong Kong, introduced to mainland China in the 1990s

alefox

While Hong Kong abolished the shared area system in 2013, it continues to persist solely within mainland China, resulting in a perplexing paradox.

The disdain for the shared area system stems primarily from its unscrupulous natureThe first flaw is space misappropriationAlthough shared areas are ostensibly standardized, the actual measurement varies significantly according to the whims of developersCommon components labeled as shared space—like stairwells, elevator shafts, or shared hallways—are often imprecisely defined, leaving buyers in the dark regarding how their shared areas are quantifiedDevelopers may even inappropriately include personal garages or parking spaces in shared area calculations, leading to misleading representations of what buyers are actually acquiring.

The ambiguity inherent in this system not only serves to obscure the truth from buyers but also leads to exceptionally low ownership ratios

Media reports have indicated that some properties allocate over 30% of their area to shared spaces, meaning that buyers investing 100% of their funds essentially receive less than 70% of the actual living areaThere are even instances where a supposed 74-square-meter unit delivered barely 40 square meters of usable space, with nearly half the price going towards shared expenses.

Compounding this problem, many shared area benefits do not accrue to residents as a collective but rather become an avenue for developers or management companies to exploit these areas for profit, undermining the financial interests of homebuyers.

Moreover, the shared area system further exacerbates these issues as property companies and heating service providers leverage this loophole to extract undue profits from homeowners

Fees for property management and heating are calculated based on the total area stated in contracts, therefore including shared spaces means additional charges on expenses that homeowners cannot escapeAnyone calculating the costs knows that if their effective ownership rate is around 70%, then 30% of their fees are unjustly lining the pockets of othersAdditionally, the shared spaces often include areas not subjected to heating costs, like garages.

Both the presale and shared area systems encapsulate longstanding concerns frequently critiqued yet rarely alteredWhy do these systems remain unchanged? The answer is simple: homebuyers are often overshadowed by entrenched interestsRevoking the presale and shared area systems is hardly an insurmountable challenge; numerous regions are initiating reforms without igniting widespread unrest, and public sentiment appears largely supportive

The true difficulty lies in dismantling the entrenched structures of power.

In the current chill of the real estate market, a spirit of collaboration is imperativeAs recently announced by the National Bureau of Statistics on December 16 regarding property prices in 70 major cities, secondary home sales continue to declineWhile a few cities have stabilized, second and third-tier cities remain in a downward trajectory, with some displaying slight slowdowns but overall still facing depreciation—a grim indicator for those already struggling with stagnation.

Amidst mounting policies pushing for reforms, it’s clear that prices are not recovering, particularly alarming for smaller cities lacking robust stimuliThis context underscores an urgent need for systemic reform, emphasizing the social utility of residential properties, genuinely prioritizing homebuyers’ experiences