(Yicai Global) Feb. 22 -- In a desperate effort to boost market confidence, real estate developers have promised to give back the deposits of home buyers in the outer suburbs of Beijing’s Fangshan district if they regret agreeing to purchase a property.

The developers of 38 local real estate projects said yesterday that if buyers wanted to walk away from deals before signing contracts, they will get back their deposits within 30 days, the Fangshan district government said on its official WeChat account yesterday. Yicai Global confirmed that was the case with many of the developers this morning.

Deposits are an important guarantee when buying or selling property. Buyers usually need to sign the contract within a few days of paying the deposit, which generally does not exceed 20 percent of the final price.

The commitment from developers in Fangshan reflects the willingness of real estate companies to offer buyers more favorable purchase conditions, Wang Yuchen, director of Beijing Jinsu Law Firm and director of the Real Estate Law Research Association of the Beijing Law Society, told Yicai Global.

According to Article 587 of the Civil Code, if a buyer cancels the transaction for personal reasons after paying the deposit, developers are entitled not to refund the money, Wang added.

“This move is equivalent to setting a 'cooling-off period' for home buyers, allaying the concerns of those who ultimately fail to make a down payment or cannot continue the transaction for other reasons,” Wang noted.

The reason for the unusual goodwill from the developers was a quick increase in local property inventories, as purchasing power and expectations were hit hard by the Covid-19 pandemic, but new projects continued to be brought into the local market, a real estate agent told Yicai Global.

The total area of commercial housing for sale in Fangshan reached 2.7 million square meters at the end of 2022, up 26 percent from a year earlier, while in 2021, it was down 9.2 percent, according to official figures from the district government.

With increasing destocking pressure, local house prices are continuing to decline. As of the end of January, the average price in Fangshan was CNY27,954 (USD4,050) per sqm, less than a quarter of that in Beijing's central Dongcheng district, per numbers from the Big Data Housing Price Research Institute and the real estate committee of the China Society of Urban Economy. Fangshan's house prices fell nearly 40 percent in January from last November.

Editors: Tang Shihua, Futura Costaglione