China’s prolonged property crisis is now hitting an unexpected target: the companies responsible for managing residential compounds.

Across the country, property service providers are struggling to collect management fees from homeowners, squeezing revenues and forcing many firms to abandon projects altogether.

The problem is emerging as another symptom of the broader real estate downturn that has gripped China since the property bubble began to unravel in 2021.

Why Homeowners Are Refusing To Pay

Many homeowners say they can no longer afford management fees in a weak economy. Others are withholding payments to pressure companies into lowering charges.

A growing number of investors who purchased multiple apartments during the boom years have also stopped paying fees, believing their properties are unlikely to recover their former value.

The result is a sharp decline in fee collection rates across the industry.

According to CRIC, the average collection rate among China’s 500 largest property management firms fell from 89% in 2021 to just 71% last year.

Vacant Homes Create A Vicious Cycle

The problem is especially severe in partly vacant housing developments.

Many unsold apartments remain under the ownership of financially distressed developers, who often fail to pay management fees on those units.

Analysts estimate China’s unsold housing stock now covers a floor area roughly twice the size of Greater London.

As revenues fall, management companies are increasingly withdrawing from projects, leading to deteriorating services, poor maintenance and security concerns.

That, in turn, further reduces property values and weakens homeowners’ willingness to keep paying fees.

Services Begin To Break Down

Residents in some compounds report overflowing rubbish, unmanned security posts, faulty lighting and poorly maintained infrastructure.

In the northern city of Qinhuangdao, homeowners were informed that a major management company would withdraw after years of declining fee collection.

Elsewhere, residents say falling service standards have already reduced the value of their homes compared with neighbouring developments.

Analysts warn that poorly managed compounds could lose up to a quarter of their market value.

Local Governments Face Growing Pressure

The crisis is increasingly forcing local authorities to step in.

Several local governments have urged public officials and Communist Party members to lead by example and pay their management fees on time.

Officials also fear that worsening conditions in residential communities could trigger broader social dissatisfaction.

In some cases, local authorities have reportedly intervened to prevent management companies from leaving projects when homeowners failed to find replacement operators.

No Quick Solution In Sight

Property experts say the issue reflects deeper structural problems in China’s housing market, including oversupply, high vacancy rates, falling demand and declining home prices.

With millions of empty homes and a growing number of owners unwilling to pay for upkeep, the crisis facing property management firms is becoming another challenge for Beijing as it seeks to stabilise the world’s second-largest economy.

(with inputs from Reuters)