Commercial flats in Shenzhen targeted by buyers from other Chinese cities betting on property appreciation in tech hub

Flats built on commercial land in Shenzhen, mainland China’s most expensive property market, are in high demand and buyers from other parts of the country are buying several properties at a time.

Residential land in mainland China is made available in 20 or 70-year leases, and only homes built on 70-year lease lands are considered standard residential units. Flats built on commercial land, with 40 and 50-year leases, require higher down payments, higher mortgage rates, longer holding periods before resale and higher facility fees from owners.

“The risk of buying flats built on commercial land is quite high, considering exit difficulties,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution. “Being well aware of these disadvantages, some buyers would like to bet on them. It is very clear that they are wagering on a long-term appreciation in properties in Shenzhen.”

A buyer from Shanghai recently bought 63 units on three floors, estimated to be worth 90 million yuan (US$12.6 million), at a project in Dream Park by developer Yanlord Land. The project has been developed on 40-year lease commercial land, and has attracted many buyers who are not locals. It presents an attractive investment opportunity also because such developments are not subject to any restrictions for buyers.

Not surprisingly, the top five buyers at the Yanlord project were not local.

Shenzhen has become an increasingly attractive property market after Beijing announced on August 19 it was picking the city and designating it a new special economic zone, where it would carry out a wide range of reforms.