China's real estate funk drags down yet another sector: property service providers

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By Clare Jim and Liangping GaoProviders of property services in China are struggling to collect management fees from disgruntled homeowners, threatening their revenue and house prices in general, while making them the latest victim of the country's prolonged real estate slump.In a weak economy, some owners cannot afford the fees or withhold payments to pressure the companies to cut their prices. And as service providers withdraw from contracts, some developments are struggling with creaking infrastructure, uncollected waste and unmanned security posts. Other people bought multiple apartments before the bubble burst in 2021 - an investment they no longer hope to recover - and see little reason to keep paying administrative costs.After decades of overbuilding, many compounds are partly vacant. There, distressed property developers owe the service fees for unsold flats. China's unsold housing stock has a total floor area that is roughly twice the size of Greater London, ANZ estimates.IS CHINA'S HOUSING STOCK TOO BIG TO MANAGE?The average collection rate at China's top 500 property firms fell to 71% last year from 89% in 2021, according to CRIC, a research firm. The firm did not break down annual figures, but industry executives say 2025 recorded the sharpest drop and the trend has gotten worse since then."Risks from the broader real estate slowdown are spilling over into the property management industry," said He Shuhua, chief operating officer of Onewo HKEX:2602, at a recent conference. Onewo, which uses the brand Vanke Service, is a property management unit of state-backed developer China Vanke SZSE:000002."Falling home prices have changed homeowners' expectations," He said. "Difficulties in collecting fees is a common problem across the industry."This sets in motion a vicious cycle, property analysts say.Falling collection rates are forcing management firms to abandon a growing number of projects, leaving homeowners and developers worried that this will further erode the value of their properties. Lower prices then reduce the incentive of homeowners to pay for their assets to be serviced.It also raises pressure on local governments to intervene by bringing in state-backed companies to maintain basic services and soothe discontent over uncollected waste, unstaffed security posts and faulty lighting or elevators."This is a unique and major issue" that has n...

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