China's Latest Data Fabrication: Home Prices "Increased" Even As Largest Home Developer Offers 25% Discounts

There has been a slew of openly bizarre, if not outright ridiculously manipulated and fabricated data out of China in the past month - which is to be expected by an authoritarian regime that for much of January arrested anyone who "leaked" the facts about the deadly coronavirus pandemic which Beijing was hoping to cover up until it simply became far too big - but the latest house price "data" may have been the straw that broke the camel's back.

Overnight, the National Bureau of Statistics reported that the latest 70-city housing price data showed that in January, the average home price appreciation in the primary market was 0.4% in January, the identical same pace as December, despite tens of millions of Chinese citizens living under quarantine or some form of lock down. Even more surreal, the number of cities with housing price increases was higher in January - which China's economy ground to a halt ahead of both the Lunar New Year and the subsequent coronavirus chaos - than in December.

Here are the details according to Beijing: Commercial housing prices in the primary market in the 70 cities tracked by China's National Bureau of Statistics (NBS) (weighted by population) rose 0.4% month-over-month in January after seasonal adjustment, same as December. Property price appreciation was faster in tier 1 cities and unchanged in tier 2/3 cities, while price declines narrowed in tier 4 cities.

It gets better: out of the 70 cities monitored, 60 cities saw seasonally adjusted housing prices increase in January (53 cities saw price increase in December last year.) On a year-over-year, population-weighted basis, in the primary market, housing price appreciation was 6.2% in January in the 70 cities, slower than 6.5% in December.

That, in a nutshell, is the official version.

Meanwhile, in the real world outside of Beijing's excel spreadsheets and goalseek models (as a reminder, and as we wrote three years ago, "the Fate Of The World Economy Is In The Hands Of China's Housing Bubble", as the bulk of China's net worth is not in the financial market but in real estate), China's biggest property developer Evergrande Group announced on Sunday that amid tumbling demand, it would launch "great incentives" to lure domestic consumers via online subscriptions starting Tuesday, a "self-rescue" promotion which analysts said would help shore up the sluggish domestic housing market in February amid the novel coronavirus outbreak.

Paradoxically, even as Beijing reports a sequential increase in home prices, Evergrande will offer a 25 percent discount for consumers who purchase housing units, including apartments and office buildings, from Tuesday to February 29. The discounts will continue and be adjusted to 22% off from March 1 to 31.

Putting the move in context, "it will be the largest incentives the firm has offered in its business history, Liu Xuefei, vice president in charge of sales with Evergrande, told an online meeting on Sunday", according to the Global Times.

But why offer the biggest incentive in firm history if the housing market is firing on all cylinders as China's NBS reported, even as tens of millions of people are threatened with arrest if they so much as exit their apartments?

Don't answer: that's rhetorical.

Some more details on Evergrande's panicked sales promotion via the Global Times:

Since Evergrande started online sales promotion Thursday amid the novel coronavirus outbreak, the number of apartments subscribed online was 47,500 units from more than 600 housing projects the company has nationwide, worth 58 billion yuan ($8.3 billion), according to the company.

Consumers who pay 5,000 yuan ($715.6) down payments and sign subscription books on the company's online platform Hengfangtong, can preorder housing resources from projects the company has across the country, said Evergrande.

From the day that consumers sign contracts until May 10, they can enjoy a right to buy at the lowest price - if the price on the home they buy goes down, they can obtain the difference and can return the apartment.

"Online promotions by real estate companies do not affect the domestic housing market that much, but if one can preorder an apartment with a 5,000-yuan down payment, the stimulus will be quite large and will attract many first home buyers who have rigid demand," Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Sunday.

"I found Evergrande's promotion ad on WeChat moments and the incentives are quite attractive. I cannot remember such large discounts a Chinese developer offered in recent years," a Beijing resident surnamed Lei in her 30s told the Global Times on Sunday.

One would almost think that Evergrande would not be offering such a giant discount if the housing market was doing as well as China's official indicated. Almost.

As the Global Times concludes, Evergrande's incentives "will help it drive sales volume and many other domestic housing developers are more likely to follow suit, experts said."

Of course, the communist party's populist mouthpiece is correct, but a familiar question emerges: just what will be the full extent of the coronavirus damage on China's housing market, when as even Goldman admits, "the outbreak of coronavirus suppressed property transaction volumes in February" and "daily property transaction volume remained low in top tier cities in the first half of February, and total transaction volume in 30 major cities were less than 10% of what the usual seasonal pattern would suggest after the Chinese New Year."

Speaking to the Global Times, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, who described Evergrande's new policy as "self rescuing," noted that instead of waiting for government support policies, domestic real estate companies should take the initiative to actively reduce housing inventories and stabilize their cash flow.

Is that a tacit admission that China will not be bailing out the housing market this time around?

In any case, in light of the above data one can see why Beijing is in such a rush to force the country's 1.4 billion residents and countless (zombie) businesses to pretend that the epidemic is over (which ifs one believes China's fake infection data, it almost is) and for people to get back to business as usual. The alternative is not only banks being flooded with trillions in bad loans, but China's biggest household asset, real estate, getting a crash course in price discovery under a severe crisis. We already know that with the Chinese economy on lock down for two weeks after the Lunar new year, the clearing price is now roughly 25% below where it was just a month ago (and a far cry from the 0.4% sequential increase according to the NBS). Will it be 50% in another two weeks, then 75% two more weeks after that, and so on?

For the sake of Xi Jinping's dictatorship, one can only hope that if the coronavirus epidemic persists - and any fake news that the virus is no longer a threat will be promptly refuted as new cases break out in work places across the country - that Beijing can find the tens of trillions in dollars, yuan or both it will need to bail out not only China's banking system, but the country's housing market as well.