In recent weeks, a heated discussion has erupted in various cities across China, including Hengyang in Hunan and Zhangjiakou in Hebei, about the controversial notion of "canceling public area allocation". This topic has even made frequent appearances on Weibo's trending searches, showcasing the public's interest and the ramifications it might hold for home-buyersThe concept of public area allocation, known as "common area shared by all" in Chinese, originated in Hong Kong during the 1950s and was adopted in mainland China in 1995 through regulations established by the Ministry of ConstructionThis concept has persisted for nearly three decades, defining how residential properties are priced and sold.

Under the existing regulations, the total area of a residential unit encompasses both the private usable area and the public shared area

To put it simply, the cancelation of public area allocation implies that properties will be solely priced based on the private usable area, excluding any public spaceThis shift aims to provide buyers with a clearer understanding of the area they can actually use within their new homesZhang Bo, the director of the Research Institute of Anjuke, perceives this change as a significant improvement in clarity for buyers but remains skeptical about its influence on actual property pricesHe suggests that while it may enhance the transparency of property transactions, the overall price dynamics of the housing market are unlikely to shift significantly.

The public shared area comprises facilities such as elevators, stairwells, lobbies, and shared walls between private unitsThe ratio of this public area to the overall property can heavily affect what is termed the "usable area rate", a critical factor for prospective buyers

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As housing development surged in recent decades, with buildings reaching greater heights and sharing more amenities, the proportion of area attributed to public spaces increased, leading to a declining usable area rate, meaning buyers were effectively paying for space they could not utilize.

In the climate of rising property prices, many buyers prioritized investment potential over livable area considerations, becoming less aware of the implications of public area allocationsHowever, as the market dynamics shift, with a notable decline in house prices recently, consumers are now becoming increasingly aware of these public space sharingThe historical context of public area allocation goes back to Chongqing, which implemented a regulation back in 2002 requiring the calculation of property sales based solely on usable areaThis logically suggests a potential future trend where more cities may adopt this method.

Several municipalities have recently announced plans to eliminate public area allocation, including notices from Zhaoqing and Hengyang slated for implementation in 2024. Other cities, such as Hefei, Zhangjiakou, and Xiangtan, are similarly exploring this shift

Notably, several real estate developments are now offering additional, non-counted areas like balconies or bays in an effort to inflate the usable area rate—an indirect means of addressing public area allocations.

For example, the Guangzhou government recently enacted new regulations on residential building density, effectively allowing larger balconies and semi-open spaces to only count as half their actual area, enhancing the usable area concept for projects within guidelinesCities like Shenzhen and Beijing have likewise relaxed construction restrictions to make further strides in improving usable area ratesThe main takeaway from these regulatory changes is a commitment—whether direct or indirect—to delivering a greater usable area for homebuyersData from CRIC indicates that, as of the first half of 2024, more than 70 new projects boasting an actual usable area rate exceeding 100% were launched across major cities, with specific developments in Xi'an and Guangzhou demonstrating percentages as high as 140%.

The underlying question still remains: Why is there a rush among various locales to push for higher usable area rates or to cancel public area allocation altogether? Proponents assert it is a response to public dissatisfaction with the opaque nature of public area allocation

According to Chen Wenjing, the Director of Policy Research at the China Index Academy, the adjustment to calculating prices using usable areas fosters better transparency and allows prospective buyers to make more informed decisionsThis clarity potentially minimizes future disputes regarding shared property areas as buyers can better understand what they are purchasing.

On December 7, 2024, a property project called Yuexiu Yunyu in Guangzhou experienced its initial public offering sell-out, primarily attributed to factors such as location and supportive housing policies, including the aforementioned density regulationsThe new guidelines have ostensibly set the stage for maximizing the actual usable area, thereby creating further appeal for buyers in an increasingly competitive market.

Though it seems that canceling public area allocation may not dramatically alter the price landscape, industry experts suggest that influences on property pricing could manifest across the board

A property intermediary from Zhaoqing noted that following the government's shift to a usable area basis for calculations, he expected prices to climb approximately 20% per unitHowever, despite encouraging news from revised pricing methodologies, many potential buyers remained indifferent after realizing the overall change in property prices was minimal, reflecting a hesitance to engage in further explorations of new purchases.

In practical terms, the most noticeable change regarding the cancelation of public area allocation revolves around the alteration of contract terminologyFor instance, previously executed sales contracts would highlight calculations based on building area solely; new contracts are expected to diverge by also featuring calculations based on usable areaYet, as real estate professionals indicated, overall changes to the fabric of transactions are far less pronounced.

While the cancellation of public area allocation certainly garners attention, the implications for other aspects of real estate transactions remain relevant as well