Idle staff and closed offices: how government curbs hit the property business in one Chinese city
Xianghe in the northern Hebei province was once a darling of property speculators, with prices doubling in less than a year, but after the local government clamped down, the speculators vanished
The main street of the small northern Chinese city of Xianghe in Hebei province, some 50 kilometres southeast of the capital Beijing, bears witness to the battles local authorities throughout the country have been fighting with property speculators.
Lined with the offices of developers and agents, up until just seven months ago it was swamped with people from the capital trying to snap up properties after President Xi Jinping had named the city in 2015 as a key area in plans to integrate the cities of Beijing and Tianjin with parts of Hebei province into a megacity.
Home prices more than doubled in less than a year, as speculators, mostly from Beijing, snapped up properties. The average price of a second-hand home surged to around 23,000 yuan (US$3,464) a square metre by March, up from 12,000 yuan in August 2016 and only 6,000 yuan in 2015.
But the buying frenzy came to a crashing halt in March, when the city government, concerned about a bubble that might damage the local economy, stipulated that non-locals could buy no more than one unit.
Then in May, the Hebei provincial government followed up by banning all non-locals from buying new flats in the areas surrounding Beijing, including Xianghe, unless they could prove they had paid local social insurance for three years.
The result is clear in Xianghe’s main street: nearly half of the property agencies have closed, while in those that remain open, sales people sit idly with no customers.
“I haven’t made a deal in the past month. In the peak time I used to make four to six deals a month,” said Chen Lin, a local property agent. He said a number of his colleagues had left the city, and that his main work now was introducing properties elsewhere in China.
The curbs hit the market in Xianghe harder than those imposed in other cities, because non-local buyers elsewhere could obtain local hukou household registrations relatively easily if they met basic requirements, for example being under 35 and with a college degree. But Xianghe’s status in Xi’s vision prompted the local government to suspend all approvals of new hukou applications pending the city’s further integration with Beijing.
According to Centaline Property, only 365 newly built homes were sold in Xianghe and its surrounding area in September, down 94 per cent from a year earlier, and a far cry from the pre-curb levels of 3,538 units a month.
Transactional prices for new homes in the county stood at 11,200 yuan per square metre in August, according to Centaline, compared to 11,943 yuan in March. Second-hand home prices are now around 10,000 yuan per square metre, less than half the March figure, according to local officials.
Annual urban income per capita for Langfang, the administrative district where Xianghe is located, stood at 34,633 yuan, compared with 57,275 yuan in Beijing.
Meanwhile the Xianghe government is sparing no effort to try and move the local economy away from property.
During a recent media tour organised by the local branch of the Communist Party, reporters were shown a 3 sq km “robotics town” development, while officials said a giant marketplace for building materials was moving to the city from Beijing because Xianghe could provide much larger display space, and drinks firm COFCO-Coca Cola was building one of its largest bottled water plants in Xianghe.
Wang Ji, a local propaganda official, said the city’s traditional furniture wholesale business would still prosper, and the government would be very selective over new businesses, rejecting any that cause pollution or were energy intensive.