Linda Wu, a product manager for Alibaba, arrived in Hangzhou a few months ago. However, she was shocked to hear a real estate agent pressure her to buy rather than rent a home close to her workplace for a “very low price.” Because many people who lost their jobs could not pay their mortgages and were listing their homes for sale at low prices, the realtor touted this as a “golden time” to buy.
A wave of layoffs at China’s largest technology firms has shaken the property market in areas where waves of IT workers, wealthy with high pay and housing incentives, have driven up prices recently.
A few years ago, parts of Hangzhou and Shenzhen, home to some of China’s largest corporations, including Alibaba Group Holding, Tencent Holdings, and Huawei Technologies Co, appeared to be immune to the problems that have beset the country’s overall housing market in recent years.
For instance, despite being 45 minutes by metro from the city center, Future Science Town in Hangzhou’s Yuhang district has recently become a hotspot for real estate due to its proximity to Alibaba’s headquarters.
Job Layoffs are in continuation
However, real estate costs in the region have plummeted since June, a result of widespread layoffs at Alibaba, which, according to financial reports, fired nearly 10,000 workers in the second quarter.
According to two local agents, job layoffs were a contributing cause in the recent decline of roughly 15,000 yuan in the price of used homes in the Yuhang district. According to a local agent website, home prices in one upscale neighborhood once reached 83,000 yuan per square meter, but the amount dropped by roughly 28% to 60,000 yuan in 2022.
On one property-agent website, the number of used properties advertised for sale grew for the ninth consecutive month in September. The trend is further supported by social media posts where unemployed technology professionals bemoan their inability to continue making mortgage payments.
According to Alan Cheng, CEO of Centaline Property Agency for southern China and general manager in Shenzhen, residential home transactions in the city of Tencent and Huawei dropped by almost half in 2022 compared to 2021. Cheng attributed this decline to the general economic downturn and the slowdown in the technology sector.
Between April and September, Tencent eliminated 7,300 positions. According to Shi, these towns have experienced rapid industrial development, tremendous economic expansion, and an influx of highly paid white-collar workers during the past two decades due to the burgeoning technology sector.
Alibaba and Huawei is offering many benefits
According to data from the National Bureau of Statistics, the number of professionals working in the software and information technology sector increased to 8.08 million in 2021, with an average annual wage of 200,000 yuan.
Technology firms, meanwhile, offered their employees a range of housing benefits. For example, Tencent provided eligible employees interest-free loans of up to 900,000 yuan in 2021 as part of a program to help them purchase their first homes in the area. Similar benefits, like low-cost apartments and rebates on home purchases, have been offered by its rivals Alibaba and Huawei.
Technology firms, meanwhile, offered their employees a range of housing benefits. For example, Tencent provided eligible employees interest-free loans of up to 900,000 yuan in 2021 as part of a program to help them purchase their first homes in the area. Similar benefits, like low-cost apartments and rebates on home purchases, have been offered by its rivals Alibaba and Huawei.
According to Shi of Credit Suisse, the so-called middle-class group will assess their financial situation and if they still require a pricey home. As a result, they “may” alter their spending patterns and investing plans.
