China Property

Land prices soar 800 per cent in Chinese backwater where Xi Jinping started his political career

As many as 25 Chinese developers bid fiercely on six plots in the town where the Chinese president worked in the 1980s, with the most expensive property costing 20,900 yuan (HK$23,945) per square metre

PUBLISHED : Tuesday, 06 June, 2017, 9:31am
UPDATED : Tuesday, 06 June, 2017, 9:52am

As many as 25 Chinese property developers, including big-name players such as Vanke, China Poly, Evergrande and Country Garden engaged in fierce bidding for six plots in the town in which Chinese President Xi Jinping had worked in the 1980s – a bit of history that has helped drive up local land prices more than 800 per cent since last December.

According to local state radio, the most expensive plot in Zhengding, a district of the Hebei provincial capital city of Shijiazhuang, was priced at 20,900 yuan (HK$23,945) per square metre, a hefty rise from the average 2,549 yuan per square metre at which the land was valued in a planned auction last December. The December auction was cancelled two days before its scheduled date.

The six plots sold for a total 4.2 billion yuan, all going to local developers.

The heated land auction in Zhengding on Friday was the latest example of just how red-hot China’s land market has become. As prices in top-tier Chinese cities such as Beijing and Shanghai surge, property developers are chasing a limited supply of land in small towns and cities near big metropolises. Jiaxing, a town neighbouring Shanghai, had to relocate its land auction to a big theatre to house hundreds of bidders last month.

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In China, all urban land for development is controlled by municipal authorities, and income from land sales has become a key source of local revenue. Nationwide, the turnover of land by value surged 34.2 per cent in the first four months of this year, compared with the same period a year earlier, while land sales by area rose just 8.1 per cent in the same period.

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Zhengding has gained nationwide fame in recent years as the town where Xi had worked for three years in the early 1980s as its party boss. A backwater about 300 kilometers south of Beijing, it has been chosen as the site for a “state-level” economic zone. Zhengding also is close to Xiong’an, an area designated by Xi for creation of a futuristic dream city.

“Many cities of Hebei will take over urban facilities from Beijing and Tianjin,” said Liu Yong, a senior researcher with the Development Research Centre, a think tank under the State Council. “Zhengding will be a key area to benefit from Xi’s plans.”

The Shijiazhuang municipal government’s decision to relocate its offices to Zhengding has further boosted the appetite for property in the district.

Zhang Dawei, a Beijing-based analyst with property agency Centaline, said the final property sales price in Zhengding is estimated at 30,000 to 40,000 yuan per square metre - still much lower than comparable property in Beijing, where the price is doubled.

“Zhengding has a special history status,” he said. “It is a typical case of a small place seeing an inflow of capital [in response to property restrictions in nearby big cities].”