Shanghai's court-auction clearance rate is 82% while Chengde is only 0.95%! If the index has no transactions, they say it hasn't fallen; third-tier homes bought in 2021 can't even clear half through court auctions; in third- and fourth-tier cities there are fewer than 2 bidders, everyone waiting for price cuts; party-owned enterprises sweep away 60-plus units at 35% of the listed price! The longer it drags on, the more people see clearly (extra update)

By analyzing national judicial auction housing data, bank non-performing asset securitization prospectuses, and local clearance rates, this video explores the true value of the Chinese real estate market. Judicial auction properties in core areas of first-tier cities maintain relatively good liquidity and lower discount rates, while third- and fourth-tier cities face extremely high failed auction rates, price cliffs, and phenomena where banks suffer bad debts and state-owned enterprises step in to take over.

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Observing the five, refusing fragmented cognition. A while ago, the China Index Academy released data on judicial auction housing nationwide from January to August. 499,000 new properties were put up for auction across 355 cities—roughly 500,000 units—a year-on-year increase of 30.67%. You don't need to be skeptical; this is still the result of desperate suppression. If it weren't suppressed, it would have easily exceeded one million units. But even with this suppression, how many of these 500,000 units failed to sell? Take a guess: 428,000 units failed to sell directly, a failure rate reaching 69.8%, and the transaction price was only about 74% of the average appraised value. In the second quarter, China Construction Bank (CCB) did something. What was it? CCB issued a tranche of non-performing asset-backed securities (ABS), packaging 8,000 defaulted mortgages to sell off. How did the prospectus describe it? It stated in black and white that the expected recovery was only 40.72%. Putting these two numbers together is the theme of our topic today: the Chinese housing market.

There are three sets of readings, and we will look at them one by one. First is the National Bureau of Statistics of the CCP's 70-city index, which showed a year-on-year decline of 5.6% in August. Then there is the China Index Academy's average price for second-hand housing in 100 cities, which claimed a decline of 7.08%. Finally, there is the transaction price from Lianjia. What did they say? They claimed the premium space for first-tier housing prices reached 7% to 8%. These three readings have one thing in common: there may not be actual transactions. Because even with companies like Lianjia, they are locked by administrative pricing, especially the listing prices, so the transaction prices they report may not be real. There is only one market where there are definitely transactions: judicial auctions by the courts. This part of the pricing is closer to the true market-wide price. Today, we will use auction prices, bank prospectuses, and court data to answer one question: how much is a house in China actually worth today? Alright, let's continue. I will first clarify the rules of the CCP's judicial auctions.

Because the meaning of discount rates and failure rates lies entirely within these rules. In 2016, the CCP issued regulations on online judicial auctions. What did they stipulate? They stipulated that the starting price must not be lower than 70% of the appraised value. If the first auction fails, the second auction must be reduced by another 20%. If the second auction also fails, it enters the liquidation process. Liquidation is based on the second auction price with a further 20% to 30% discount. How is this appraised value determined? In 2018, China's Supreme People's Court stipulated that courts send requests to online inquiry platforms in the civil database. There are actually only a few main ones: JD.com, Taobao, and the Industrial and Commercial Bank of China—just three. Don't these platforms get customer inquiry information? Then they take an average of these inquiry values as a reference price. The inquiry report is valid for one year, but their reports actually lack many dimensions. For example, JD's report itself states that there was no on-site inspection and it is for reference only. To go further, what is the appraised value anchored to? It is actually just the initial package.

Report the secondary market listing price at that point in time, and then the appraised value is often even higher than this market price. What is the purpose of this? The purpose is to leave room for subsequent discounting. So the denominator for the 74% discount rate is that appraised value; in other words, the judicial auction transaction price is about 74% of the current listing price, and about 80% of the actual secondary market transaction price. Let's look at the listing market side. Hey, this is data from E-House. In the eight key cities, 1.23 million units were listed at the end of June this year, which is exactly 280,000 fewer than in June last year. Hangzhou's listing volume also shrank by 39%, Guangzhou's fell by 32%, and Shanghai's fell by 31%. The decrease in listings is not because the houses were sold, but because they couldn't be sold at the desired price, so the houses were withdrawn. Houses that are withdrawn have no price. The notes of the 70-city index from the National Bureau of Statistics of the CCP state it quite clearly. What does it say? It says where the data for secondary housing comes from: it is reported by real estate agencies and collected by investigators. For those that did not have transactions in the current month, the city is treated as what? It is treated as having no change. So, the object we are analyzing today is clear. What kind of data is reported by intermediaries? It is subject to various administrative restrictions, including price controls, and even includes not allowing intermediaries to list a bottom price. That is not entirely accurate; it is not allowing a listing below a bottom price that is the psychological bottom line of the CCP, and it also allows for this 'no change' index. So who is its opponent? It is a price that is forcibly prevented from having 'no change' by the court. Hey, this is what we are comparing today. Let's look back at the judicial auction market this year. The data provided by CIA (China Index Academy) from January to August shows how many were newly listed? 499,253 units, but only 143,854 units were sold. The clearance rate was only 23.53%, the failed auction rate was as high as 69.8%, the average transaction price was only 4,960 yuan per square meter, while the average appraised price was 6,339 yuan, and the discount rate reached 74% directly. The clearance rate for the single month of August was only 15.46%, and the monthly clearance rate fluctuated between 12% and 8%. We look at the sequence of the past five years. How many were listed in 2021? 447,000 units, and the transaction rate was 30.9%. The average discount rate for residential properties at that time was only about 84%. By 2022, 606,000 units were listed, and the transaction rate was 19.4%. In 2024, 768,000 units were listed, and the clearance rate was 22.9%. The discount rate at that time had already reached 74%. In 2025, 719,000 units were listed, the clearance rate was 23.5%, and the discount rate was 74.1%. Moreover, in 2021, the average price of residential properties was still 8,082 yuan per square meter. In other words, in these five years, the listings have nearly doubled, but the clearance rate has dropped from 31% to 23%. And we have sufficient evidence to believe that this is still the result of the CCP strictly controlling the volume of judicial auctions; otherwise, it would inevitably fall below 20%. Hey, this is still conservative. The discount rate has also dropped from 84% to 74%, and then it got stuck at 74%. It just won't move. Hey, why is it stuck at 74%? Let's look at the auction rounds. Among the residential transactions from January to July according to CIA, first-round auctions accounted for 41.9%, and the average discount rate for first-round auctions was 84.1%. Second-round auctions accounted for 45.2%, and by the second round, the discount rate was already 71.4%. Sales accounted for 10.8%, and the discount rate was 60.3%. In other words, more than half of the judicial auction houses are sold only after the second round, and the price sold is 60% to 70% of the appraised value. In other words, what is the current market preference? It is still built on the basis of further price concessions; only in this way will there be any transaction volume. So what does a 70% failed auction rate actually mean? This is the most interesting part today. The 74% discount rate describes the 30% that were sold, while the 70% failed auction rate describes the 70% that were not sold. The two numbers must be put together to be a complete price, right? I am using the transaction rates and discounts for each stage in the first half of 2026 from RealData. Let's use this discount to go through three rounds of auctions for 100 houses, and everyone will be able to see this process. Look, the clearance rate for the first round is 15.6%. In other words, out of every 100 houses, only 15.6 are sold at 83% of the appraised value, and the remaining 84.4 enter the second round. The clearance rate for the second round is 22.8%, so 17.1 will be sold at about 69% of the appraised value, and the remaining 67.3 will enter the sale stage.

The transaction rate for the sales was 10.88%, which translates to about 7.3 units, and they were sold at 67% of the appraised value. After going through three rounds, there are still 60 units that remained unsold, while the 40 units that were sold, when weighted by transaction volume, were actually discounted at 74.1%. Therefore, the 74% announced by China Index Academy refers to this; it did not calculate anything else, such as the 60 units that failed to sell. If the liquidation were to continue, the clearance price would have to be based on the second auction price, meaning it would be discounted to 80% of the second auction's starting appraised price—well, 70% multiplied by 80% equals 56%. Yet, not a single person placed a bid for those 60 units at the 56% appraised value level, which implies that the liquidation price of the market for those 60 units is lower than 56% of the appraised value, right? However, no one knows how much lower because there were no transactions, and this is what we call censoring bias. The index only records transactions, and the price of the transacted portion is the best part, whereas the worst-priced part can never enter this index. If the 60% that failed to sell were also factored in, then release all of them.

The median liquidation price of judicial auction properties is below 50% to 60% of the appraised value, and this is still a conservative estimate. Now, let us apply this proportion to a specific house. For the National Bureau of Statistics' secondary housing price index for tier-3 cities, the Chinese Communist Party does not release cumulative values, so I can just multiply the year-on-year baseline rates for each August consecutively, right? From August 2021 to August of this year, tier-1 cities accumulated a drop of 15.6%, tier-2 cities dropped by 22.3%, and tier-3 cities dropped by 24.9%. In other words, for a house in a tier-3 city purchased for 100 yuan in August 2021, the CCP's index only states how much is left today? The listed price is still 75, and if discounted further by 93% based on actual secondary transaction prices—this 93% is the bargaining benchmark between Shanghai Lianjia and Beijing—meaning that when finalizing the contract, the seller usually gives another cut based on the listed price, and this cut lops off another 0.7% from the total price, ultimately ending up around 69.8%, roughly 70%. Once the house enters judicial auction.

The appraised price is approximately equal to the listed price, which is 75. The first auction starts, and after the first auction discount, it is 52.6. The second auction starting price becomes 42.1. Then, what is the first auction transaction price? 62. The second auction transaction is 52. The clearance transaction is 50. As for the 60% of houses that were not sold, the liquidation price is lower than 42, meaning it is below 42% of the 2021 housing prices. The CCP's index only says it dropped by 25%, but the median houses in the judicial auction market cannot even liquidate half of 2021 levels. Speaking of this, surely someone will say, oh, judicial auctions are cheap because they are troublesome, and this price cannot be viewed as the market price. We really need to seriously dissect this argument. The trouble with judicial auction properties is real, taxes are generally borne entirely by the buyer, and the property management and utility fees owed by the former owner are not handled by the court either—buyer has to cover them themselves. Some properties still have leases and people living in them, and you have to figure out how to clear them out yourself. But these troubles in recent years have only decreased, not increased. In 2022, the Supreme People's Court of the CCP even issued a notice stating not to.

Perhaps write in the auction announcement again that all taxes and fees are borne by the buyer. In 2024, another document was issued requiring the court to be responsible for clearing out the houses before handing them over to the buyer. In terms of enforcement, although buyers still frequently get the short end of the stick, the trouble is at least no greater than five years ago. So the trouble hasn't increased, but the transaction prices mentioned earlier dropped from 84% of the appraised value to what? 74%. The clearance rate, which is the proportion of houses whose auction period expired and were actually sold, dropped from 31% to 23%. Look at the extra chunk that dropped—does it have anything to do with the trouble? Absolutely nothing; isn't it simply that the houses themselves are no longer worth this price? There is an even harder control group, which is tier-1 cities under the same rules, similarly listed on JD.com and Taobao, with buyers footing the taxes and fees. The clearance rate for residential judicial auctions in Shanghai from January to August this year was 82%, meaning more than 8 out of 10 units can be sold. Chew on that: the judicial auction mechanism itself will not depress prices to 50% or 60%; as long as there is demand, the judicial auction price in core tier-1 areas can return to 80% to.

90%. What about tier-3 and tier-4 cities? Well, they are fucking miserable. Let me give a few examples. What do you guess the judicial auction clearance rate in Chengde was in August this year? 0.95%. Shanghai's is 82%, and this is not even 1%—out of 100 houses, they can't even sell one. The rules are the same, so the low judicial auction prices in tier-3 and tier-4 cities are not a flaw of the judicial auctions; it's that nobody wants houses in tier-3 and tier-4 cities at that price. Why doesn't anyone want them in tier-3 and tier-4 cities? This brings us back to the price reduction rules of judicial auctions. Everyone knows that within 30 days there will be a second auction, and the starting price will drop by another 20%. If the second auction fails again, it enters the clearance process, so can you keep waiting? The price reduction schedule is public, so the buyer's calculation is very simple: if no one bids in the first auction, wait for the second auction; if no one bids in the second auction, wait for the clearance. There are traces of this in that set of data from Ruilian Shuke: the transaction rate for the second auction is 20%, which is slightly higher than the 15.6% of the first auction—they are waiting. In tier-1 cities, this waiting still has some.

Even for a judicial auction property in the core district of Shenzhen, there were still an average of 6.59 people signing up, meaning at least there is still some competition. But in tier-3 and tier-4 cities, for example, what was China Index Academy's exact phrasing for Zhumadian in May? The average number of bidders was less than two people, which means there is only one or two people per property, so no one is in a hurry and everyone is just waiting. The more people waiting, the more failed auctions there are; the more failed auctions there are, the more people expect prices to drop even further afterwards. Well, this is a self-fulfilling prophecy of expectations. This is also one of the reasons why judicial auction prices in tier-3 and tier-4 cities can plummet all the way down to 50% or 60% of the assessed value. But even when dropped to 50% or 60%, they still cannot be sold. Can this be seen in the index of the National Bureau of Statistics of the CCP? Well, no, it cannot. The rule for the 70-city index is that second-hand housing data is reported by agencies, and if there is no transaction in that month, what is it counted as? It is counted as no change. Moreover, the CCP has now tightly restricted the asking prices of intermediary agencies using administrative directives; the price you can list a property for and the price you can actually sell it for are two different things.

What kind of problem does this lead to? It leads to a situation where the harder a city is to sell in and the fewer transactions there are, the more stable the index actually appears to be. Individual cases that cannot be seen in the index can be seen elsewhere, and I have organized all the cases I could find into this chart. To summarize, what does it look like? The discount in tier-1 core districts is 10% to 30%, tier-2 districts see discounts of 20% to 40%, and tier-3 and tier-4 districts see discounts of 40% to 60%. Everyone can compare these figures. Will prices continue to trend downward going forward? What should we look at? We need to look at how many more properties are still heading to the courts. The process of a mortgage-defaulted property reaching the judicial auction stage goes like this—I am talking about the normal process. First, the borrower fails to make payments for three consecutive months, allowing the bank to unilaterally declare the loan due in advance. Then the litigation period is about half a year, closely followed by asset freezing. Once the judgment is handed down, the court will commission an assessment, followed by the first auction, second auction, and final liquidation sale; every step has a timetable. In individual cases where mortgages defaulted at the end of 2021, auction notices were only received in September 2023. From mortgage default to the first auction, a property generally takes one and a half to three years.

What does this mean? It means the properties currently listed by the courts today defaulted between 2023 and 2025, while the new bad loans added by banks this year will only become eligible to be listed in court next year or even the year after. What about the banks' non-performing loans? The mortgage non-performing loan rates of the six major state-owned banks have surged by more than 50% from 2020 to this year at ICBC, CCB, and BOC; Bank of Communications is the most badass, directly doubling. Cui Minwen, vice president of Pudong Development Bank, told this harsh truth: he said that a large number of customers have appeared who have lost their ability to pay but have not lost their creditworthiness, meaning people do not want to default, but they simply have no income left to make repayments and cannot afford it anymore. At the same time, banks have no other choice at this juncture but to negotiate a minimum repayment, which is essentially a symbolic monthly repayment mainly to prevent the bank's non-performing loan figures from looking too disgraceful. Aside from mortgages, there is another channel called business loans. During those years when housing prices were high, many people mortgaged their properties to borrow these business loans, and then many of these business loans flowed right back into the housing market, which is equivalent to adding a very high leverage for themselves. Among listed banks, the amount of business loans flowing into the property market is at least 1.5 trillion to 2 trillion yuan, and business loans generally need to be renewed every three years, so we can do the math.

Suppose in 2021 a property—say this property was worth 5 million yuan—how much could be borrowed if taken out as a mortgage loan? 3.5 million yuan could be borrowed. When your three-year term expires, you either have to pay off the balance in full or renew the loan. Well, if you haven't paid it off first, you have to renew the loan. Then the bank will reassess it based on a 20% price drop, so how much can you still borrow? 4 million multiplied by 0.7, meaning you can only borrow 2.8 million yuan. The borrower has to come up with the remaining 700,000 yuan in cash; those who cannot pay are considered in default, and those in default will enter the court system. Therefore, the number of judicial auction listings in the first half of this year directly surged by 23%. At this rate, the number will approach 900,000 properties this year, even higher than the peak in 2023. What is the CCP's solution? At the end of August this year, the CCP's central bank and the National Financial Regulatory Administration issued Document No. 171, which basically allows borrowers who cannot make repayments to defer payments. If deferral doesn't work, they get an extension, or the repayment of the principal is directly delayed. The maximum extension period is half of the original loan term. In late September, reporters from 21st Century Business Herald asked several major banks about the detailed rules, and the reply was: well, it is still being discussed, but in fact, it is already being implemented.

Actually, this phrase is just a way for banks to save face, but no matter how much you extend it, it only pushes the repayment time further down the road, and not a single penny of the owed debt is reduced. Properties not seeing court action today just means things have been pushed back another few years. Let's look at how banks themselves price these properties: the asset-backed securities prospectus for CCB's non-performing assets mentioned at the beginning has two particularly critical figures. At the time of loan disbursement, the weighted mortgage-to-value ratio of this batch of housing loans was 71%. Back then, the property value could still cover the loan with plenty to spare, with at least a 29% buffer. By the time of packaging today, what is the latest mortgage-to-value ratio? 95.01%, and this is probably an estimated value where they held back and showed mercy. To prevent these loans from going off-balance-sheet, the current valuation of the property is just technically barely enough to cover the owed principal. But remember, this is only a valuation; if you actually want to sell it, what did Agricultural Bank of China write in its own prospectus for the same category of securities? It wrote that assuming a quick liquidation, a 30% discount must be applied. Once this 30% discount is applied, it completely goes off-balance-sheet.

If you deduct two or three years of interest, legal fees, and taxes, that is why the projected recovery rate for this phase of China Construction Bank's ABS is only about 40 percent. What about an ABS from the Agricultural Bank of China? The recovery rate is only 35 percent. Out of 4.91 billion yuan in debt, they only issued 1.235 billion yuan in securities, which is basically selling it off at a price of 30 percent. This recovery rate is getting lower year by year. For similar securities, the projected recovery rate was 60 percent in 2022, 47 percent in 2024, and for the two phases in 2026, one is 40 percent and the other is 35 percent. In the documents banks show to investors, they have already marked down the value of foreclosed homes to 30 or 40 percent of their original value. Will this price in turn drag down the price of homes that haven't been foreclosed yet? Absolutely. In August this year, in the Administrative Measures for Personal Housing Loans, the Chinese Communist Party (CCP) divided defaults into two categories. One is newly issued mortgages that go into default; in this case, what is the value of the house? It is based on the lower of the transaction price or the appraisal price. The second category is mortgages that have already been issued and have been in place for a long time.

In this situation, the collateral—the house used as security—must be re-evaluated at least once a year. So, what is the evaluation based on? The judicial auction inquiry reports on Alibaba are very clear: they are based on transaction cases of judicial auctions in the same city and district. Well, there you go, hasn't this formed a closed loop? Third- and fourth-tier cities are already in this loop. In this loop, if the judicial auction price is low, the next round of appraisal prices will be low, then the starting price for judicial auctions will also decrease, and the bank's re-evaluation of the collateral will also be lower. Once the value of the collateral drops, the amount a new buyer can borrow decreases, meaning they have to pay more for the down payment, and fewer people can afford to enter the market. Conversely, what happens to failed auctions? There will be more of them. Then the judicial auction price will have to drop even further. As mentioned earlier, the transaction rate for second auctions is higher than for first auctions because buyers are waiting for this loop to turn to the next round. Finally, if it doesn't sell after three rounds, where does that 60 percent go?

One path is for the bank to accept the property in lieu of debt, meaning they take it back themselves and record it on their books as debt-offsetting assets. Regarding these houses taken back as debt-offsetting assets, CITIC Bank made a 55 percent impairment provision in 2025, effectively admitting on their books that these houses are worth less than half of their original value. But what did the Bank of Zhengzhou say in its semi-annual report? They claimed that no impairment had occurred, meaning they didn't write down a single cent. For the same type of asset, one bank says it has fallen by more than half, while another says it hasn't fallen at all. This is how the real price is locked inside bank ledgers. What is the other path? It is for the CCP's party-owned capital to step in and take over. In January this year, in a residential complex in Nansha, Guangzhou, all 88 foreclosed homes were sold. Out of the 88, more than 60 were bought by the same buyer, a company called Guangzhou Nansha City Operation Co., Ltd.—a typical party-owned enterprise. The transaction price was only 6,000 to 7,000 yuan per square meter, while the listed price in the same complex was over 20,000 yuan, which is about 35 percent of the listed price. What did Meng Xiaosu, the former head of the CCP's National Housing Reform Technology Group, say at the end of August?

He suggested that the total number of foreclosed homes nationwide, plus the direct-supply homes taken back and resold by banks, amounts to 800,000 to 1 million units, with a value of about 700 billion yuan. What did he suggest? He suggested setting aside 500 billion yuan for state acquisition and storage. But everyone should just take that statement as bullshit. Trying to leverage a market at the level of 200 to 300 trillion yuan with just 500 billion? You're dreaming. In 2021, this scale was over 400 trillion yuan; now, only this much is left. If the CCP really had the money to buy up all these houses at the judicial auction price, that wouldn't be impossible, and it would be equivalent to admitting this price to the market. But after they are taken away, these houses are no longer listed and no longer traded, and they disappear from every index. Price discovery has reached this point: prices are being locked into the ledgers of party-owned enterprises and banks. If the CCP is happy to lose money to help people get out of their positions, I am all for it. But anyone who believes their bullshit is truly out of their mind. Japan has actually already gone down this road, and they went through the entire process.

In 2003, the Bank of Japan published a study in which they examined nearly 30,000 houses and plots of land auctioned by courts in the Tokyo area over a decade. The conclusion was that the court auction prices fell earlier and harder than the land prices announced by the government. Government data lagged by one to two years. By around 2002, creditors of houses auctioned by Tokyo courts could only recover an average of 34 percent of their outstanding debt. Residential land prices in Japan's six major cities fell by a full 60 percent from 1991 to 2005, and the decline lasted for 14 years. The Bank of Japan eventually wrote off nearly 100 trillion yen in bad debt losses. Why did it drag on for so long? At the time, Japan's approach was very, very similar to what the CCP is doing today: banks refused to admit losses, bad debts were rolled over again and again, and the government dragged its feet while waiting. A study by the Federal Reserve Bank of Philadelphia also makes it very clear: for every year that the liquidation of mortgage bad debts is delayed, the final loss rate increases by 8 percentage points. Eight points every year! During the worst of the last cycle in the U.S. in 2008, the two mortgage giants, Fannie Mae and Freddie Mac, lost 48 dollars for every 100 dollars of bad mortgage debt. If you apply these two points to China, what does that mean?

Extending the term is just kicking the can down the road. If bad debt assets are not provisioned for impairment, it is essentially hiding bad debts in the ledger. None of these measures change what a house is actually worth; they only change when that price becomes visible. The longer you delay, the more you have to acknowledge in the end. This is an economic law, and it is an economic law that the Chinese Communist Party (CCP) cannot manipulate. So, if you are following Chinese housing prices, what should you pay attention to? Well, only judicial auction prices are guaranteed to result in a transaction. The judicial auction mechanism itself does not drive prices down to 50% or 60% of their value; core areas in first-tier cities still have liquidity, and those prices are only 80% to 90% of the market price. Houses in third- and fourth-tier cities are now unwanted; prices have been slashed to 50% or 60% of the appraised value and still cannot be sold. This is the true value of houses in third- and fourth-tier cities. The supply behind this is already prepared; the mortgage bad debts of the six major banks will continue to enter the courts over the next year or two. Banks have already written in their own prospectuses that the recovery rate for foreclosed properties is down to what? 35% to 40%. Judicial auction prices, through appraisal and asset revaluation, are passed down round after round, dragging down the prices of houses that have not yet been foreclosed.

The CCP's method is to delay and hide it in the ledger. These methods can make the index look a bit better, but they cannot change what the house is actually worth. Moreover, this technique has been debunked countless times, so don't fall for it.