170,000 units with only 27,000 units sold, judicial auction housing market cools in first two months, 30% discount sales become the norm

Our reporter Li Kaixuan, Beijing

As judicial auction homes are fully included in purchase restrictions and the price gap between second-hand homes narrows, the judicial auction market has experienced a phenomenon over the past two years: abundant listings but declining transaction volume and prices. Data released on March 11 shows that in the first two months of this year, the average transaction price for various judicial auction homes nationwide was 4,869 yuan per square meter, down 8.1% year-on-year, with an average discount rate of 71.1%.

Additionally, the clearance rate remains low. In the first two months of this year, the judicial auction clearance rate was less than 17%. During interviews, a reporter from Huaxia Times learned that in recent years, the advantages of judicial auction homes have diminished. Due to certain risks involved, many buyers are hesitant, and the number of “bargain” properties available has also decreased.

Market Decline in Quantity and Price

According to data from the China Index Academy, in the first two months of this year, the total number of judicial auction listings in the country was 170,000, a decrease of 2.3% year-on-year, with a total of 211,000 auctioned properties. However, the number of properties actually sold remains small. Data shows that in the first two months, only 27,000 properties were sold, down 4.7% year-on-year, with a clearance rate of 16.1%. The total transaction amount was 37.34 billion yuan, a 16.5% decline compared to the same period last year.

Besides the disappointing transaction volume, prices have also fallen. In the first two months, the average transaction price for judicial auction homes nationwide was 4,869 yuan per square meter, down 8.1% year-on-year, with an average discount rate of 71.1%. Notably, the market shows significant differentiation across cities of different tiers, with first-tier cities having much higher average transaction prices than second-, third-, and fourth-tier cities. Among them, Shenzhen’s judicial auction homes are the most “hot,” with a clearance rate reaching 66.4% in the first two months.

Data indicates that Shenzhen had 491 residential properties listed for auction, with 326 sold, a transaction discount rate of 90.4%, and an average transaction price of 40,611 yuan per square meter. The China Index Academy told Huaxia Times that the high discount rate in Shenzhen is due to the valuation aligning closely with market value, the bidding enthusiasm for quality properties, and recognition of core property assets’ worth.

Residential properties continue to dominate the judicial auction market. Data shows that in the first two months, new residential listings totaled 40,000, with 72,000 properties reaching the auction deadline, 19,000 properties sold, and a total transaction amount of 19.68 billion yuan, accounting for 52.7% of all property transactions. In comparison, transactions involving commercial properties, land, and other real estate types are relatively smaller.

Normalcy of Discounted Sales

It is worth noting that the trend of residential judicial auction homes differs slightly from the overall market. Data shows that in the first two months, the number of residential auctioned properties increased by 4.1% year-on-year, but the total transaction amount was 19.68 billion yuan, down 19.9%.

“Fewer properties are sold in the first auction. The starting bid is usually 70% of the assessed value. After the first auction, the starting bid is often lowered again, typically to 70% or 80% of the initial bid,” said a judicial auction intermediary on March 12.

Buying judicial auction homes is often called “bargain hunting,” as low prices are a major attraction. For example, in Beijing, in the first two months, 476 residential properties were listed for auction, with 164 sold, a clearance rate of 34.5%, and an average discount rate of 74.5%. According to Beike Zhaofang, as of March 12, the average second-hand home listing price in Beijing was 52,954 yuan per square meter.

The Huaxia Times reporter noted that in some cities, the transaction discount rate for judicial auction homes is even below 70%. Data shows that in the first two months, the discount rate for residential judicial auction homes in Chongqing was 67.1%, Xuzhou 66.7%, and in Wuxi, Nanchong, and other cities, it was also below 70%.

A real estate intermediary told Huaxia Times, “From observation, most properties go into the second auction stage. Very few are sold in the first auction. Factors affecting sales include price, occupancy status, interior renovations, and whether the original residents need to be evicted by the buyer.”

“Finding a bargain” is becoming more difficult

“It’s indeed cheaper, but really hard to buy,” said the intermediary, describing the current judicial auction market. The Huaxia Times learned that online judicial auction transactions began as early as 2015. At that time, judicial auction homes were not restricted by policies, making them a popular way for many buyers to bypass purchase restrictions and increase their property holdings.

Because prices are also below market value, buying judicial auction homes is often associated with “bargain hunting.” At the end of 2021, the Supreme People’s Court issued new regulations stating that judicial auction activities organized by courts are subject to local purchase restrictions. Buyers from restricted cities are not allowed to participate in bidding. This marked the beginning of the “purchase restriction” era for judicial auction homes.

“Being included in purchase restrictions removed a clear advantage of judicial auction homes. Although many cities have relaxed restrictions over the past two years, and first-tier cities have made adjustments, the declining second-hand home prices have also reduced the price advantage of judicial auction homes, which still carry certain risks,” the intermediary explained.

Additionally, the intermediary noted that the number of judicial auction homes has increased in recent years. “However, from the time a property defaults or faces guarantee issues to entering auction, it can take a long time—often one to two years—due to creditor collections, lawsuits, and other procedures.”

He added, “Our feeling is that there are more listings now, but fewer actual sales, and very few genuine ‘bargain finds.’ As second-hand home prices are also falling, normal online transactions are a better choice with no risk.”

Editor: Zhang Bei Chief Editor: Zhang Yuning