As the coronavirus epidemic bears down on many industries in China, real-estate companies—who have found themselves especially hard-hit—have turned to online sales to generate more sales. Opinions about the strategy’s effectiveness, and the industry’s risk amid the coronavirus, are mixed.
Prices for new homes in 70 large cities inched up only 0.27%—the lowest number in 18 months—from December to January. Additionally, a survey by brokerage firm China Merchants Securities indicated that home sales plummeted 90% year-on-year (YoY), while another study by Centaline Property Agency estimated the number to be even higher, at 95%, with February predicted to be the first month to fully bear the impact of the virus.
While people’s unwillingness to view properties in-person brings offline sales to a halt, real estate titan Evergrande Group has turned to its in-house listings app Hengfangtong to offset some of these losses. Although the total amount of sales generated by this strategy is unclear, the company said almost 47,540 down payments for apartments have been made from Feb. 13 to Feb. 16 as they aggressively pushed online sales.
Evergrande Group was among the first batch of companies to launch aggressive promotions to spur sales through the internet, including a new VR home viewing feature on its app and discount deals on purchases. The new function allows buyers to have a panoramic house tour from their computers or smartphones, rather than just static pictures.
Other industry giants, including Vanke, China Poly Group, Greenland Holdings, and Country Garden have also geared up aggressively for online services, releasing apps and WeChat mini programs providing VR digital viewings. These companies have also introduced livestreaming presentations to lure more buyers.
Some analysts say the results of some of these marketing initiatives are promising.
“Amid the epidemic, developers are turning to creative online sales tactics. It’s a must and will pay off,” Zhang Dawei, an analyst at Centaline, wrote in his blog.
Zhang added that if the epidemic could be contained in February, the pressure on property companies would be relatively controllable, although if the virus continues to spread, the pain would be more prolonged and deeper as cash flow tightens.
But not everyone believes online sales can do much to alleviate the industry’s woes.
Xing, who works for a Yunnan-based property company, resumed work after an extended Chinese New Year holiday to find herself in this brave new online-focused world. As a marketing specialist, her day used to involve planning offline campaigns and partnering with ad agencies. Now, she promotes the firm’s WeChat mini-program and apps, lures new buyers through livestreaming, and keeps connected with existing customers online.
“Things like online promotion and digital viewings, no matter how realistic they are, can hardly translate into real transactions,” she said. “In most cases, it doesn’t work.”
However, Xing noted that while VR and livestreaming may not close deals, it can help companies find and qualify potential customers.
“For ordinary people, the period of buying a home is relatively long, and they need to get firsthand experience to decide. Livestreaming and apps, some of which provide the whole suite of services from viewing to making a deal, only serve as a supplement to the traditional offline transactions, helping with acquiring new potential buyers and keeping old customers in the loop,” She said. “They’re not a perfect all-in-one solution.”
Furthermore, one major source of losses cannot be mitigated by new sales strategies. Project stoppages, provincial and municipal postponements on construction, and difficulties for employees heading to work—such as transport and quarantines—are causing costly building delays for real estate companies. According to a report from real estate service provider Leju, at least 64 provinces and municipalities have issued policies suspending work until February 10. However, many projects remain closed well beyond this date, says the report, citing an engineering manager with firsthand knowledge of the issue.
Losses in house sales for the first quarter of 2020 could hit RMB 1439.8 billion (USD 205 billion), according to Sheng Songcheng, former head of the Financial Survey and Statistics Department at the People’s Bank and professor at the China Europe International Business School.