Hangzhou’s realty prices rising, but so too is its reputation as China’s answer to Silicon Valley
Already home to Alibaba, the Zhejiang capital is targeting 1,000 hi-tech enterprises, 10,000 start-ups, and 300,000 sector staff within five years
Hangzhou has become the so-called “Silicon Valley of China”.
But that bright new moniker, together with the expensive facelift ahead of the upcoming G20 summit, and ongoing infrastructure expansion, have also massively inflated property prices in the country’s eastern metropolis.
Zhang Wei, who moved to the city from Beijing a year and a half ago to join a technology company, made up his mind in June to buy a new apartment in its Yuhang district for about 2.5 million yuan (HK$2.9 million), or 21,000 yuan per square metre.
“Property prices in the district have been rising fast since February, right after the Lunar New Year,” he said.
“It’s better to buy sooner rather than later, or it could soon become too expensive.”
Zhang said for new units being released by a developer for properties of a similar size in the area – a suburb in the northeast of the city – the average price has now raced ahead to about 25,000 yuan per sqm, almost 20 per cent higher than his apartment.
And he expects the pace of increase to continue, as the city plans further expansion in its infrastructure, as it prepares for the 2022 Asian Games.
Demand in the Yuhang district, particularly, is huge because of the government’s initiatives to
attract technology companies.
Its biggest local resident is tech powerhouse Alibaba Group, the owner of South China Morning Post.
“But becoming the country’s Silicon Valley comes with a price,” added Zhang.
Data from China’s statistical bureau show new home prices in Hangzhou rose for a 16th consecutive month in July, growing 2.4 per cent. Second-hand home price growth was relatively mild, with data from real estate listings website Anjuke.com showing the average price in August increased by 1.75 per cent from a year ago.
Yuhang outperformed that city average, however, with 12.9 per cent price growth, while the inner-city Shangcheng district also saw a 9.1 per cent increase in August, from the previous year.
Competition to attract hi-tech residents in China is intense, but Zhang added that Hangzhou has certainly stolen a march so far on its nearest rival, Wuhan, the capital of central Hubei province, which also has plans to position itself as a hi-tech hub.
The capital of Zhejiang has already attracted US technology giant Cisco Systems, which set up its China headquarters there in 2014. And other international names with a strong presence include internet services company NetEase Inc and Nurotron Biotechnology, the cochlear implant maker.
The provincial government unveiled its latest master plan earlier this month to further develop the city into the country’s very own Silicon Valley, setting a target of 1,000 hi-tech enterprises, 10,000 technology small and medium-sized enterprises and 300,000 staff, within five years.
“The Silicon Valley concept will draw some speculative capital into Hangzhou’s property market, but that won’t sustain long-term growth,” said Zhang Dawei, chief analyst at real estate agency Centaline Property.
“Infrastructure development in the city for the G20 summit and other international meetings has lifted property prices, yet growth momentum will depend more on the overall economic environment,” he said.
Compared with the US’ Silicon Valley, home to sixteen Fortune 500 technology companies, including Apple, Facebook and Oracle, none of Hangzhou’s tech firms are on that list, not even Alibaba.
But bear in mind the city only started its high-tech push in 2011.
That year it created its Future Science and Technology City, in Yuhang, positioning it as an innovation park for overseas tech talent.
Wu Liang, a returnee from the US whose start-up is developing a mobile app to provide real-time analysis of people’s skin conditions by taking photos with their smartphones, started his business there in 2014 and says property prices, rents and living costs have been rising ever since.
But he adds, they are still very affordable compared with Beijing and Shanghai.
“I’m renting a three-bedroom apartment nearby which costs me just 3,600 yuan per month.
“Talented professionals want to come and stay in Hangzhou, even though salaries are less attractive. All our costs here are much lower,” he said.
Hangzhou start-ups also have access to Zhejiang University, already known as a cradle of science and technology skills.
Alibaba itself, is also considered as a training hub for talent, with many of its former employees going on to found some outstanding businesses, including taxi-hailing app Didi Dache (now known as Didi Chuxing) and fashion-focused e-commerce site Mogujie.com.