Home hunters in major Chinese cities forced to head further afield
Whether people are willing to compromise on the quality of the homes for location, or vice versa
Life was a lot easier for Liu Xin when he lived in Dongdaqiao, an area close to the centre of Beijing.
The 33-year-old was within walking distance of work, and enjoyed a convenient social life.
Now he lives 26 kilometres from work, his commute by car and subway takes up to an hour and a half, his neighbourhood has few amenities, and he rarely sees his friends. But at least his home is bigger, and has a brand new bathtub and kitchen.
Li, who works in the technology field, is one of a growing number of Chinese urban professionals facing a tough lifestyle choice: a small, rundown, second-hand home with all the trappings of city-centre living, or a nice, big, brand new home in a distant suburb, or even neighbouring province.
“When I lived in Dongdaqiao, I could walk to work. I often used to hang out with friends until midnight without worrying about getting home too late,” he recalled.
“But now there is no such thing as ‘nightlife’. I want to drink and chat with my old friends but we live in different corners of the city. When we meet, we are already worrying about getting back home late.”
He partially commutes by car, but as it is extremely difficult to get a Beijing licence plate he opted for a Hebei plate. This enables him to drive to outside the fifth ring road – the fifth concentric ring of roads surrounding the Chinese capital that serves as a dividing line between what’s considered the urban area and the suburbs.
His travel time ranges from 60 to 90 minutes, depending on the traffic. Local amenities are scant and Li also has to drive to the nearest supermarket to buy his groceries.
A recent report by Express-in, a big-data analytics and marketing firm, found 71.3 per cent of non-local Shanghai workers (a group that has adopted the moniker, “drifters”) now consider buying their homes in Jiangsu or Zhejiang, two nearby provinces to find an affordable home.
Suzhou and Kunshan, two Jiangsu cities 58 and 90 kilometres west of downtown Shanghai, topped the list with around a third of home seekers preferring to live there. Wuxi in Jiangsu and Jiaxing in Zhejiang, two even further away cities, followed, with about a quarter choosing there.
Express-in mined its data through search words from various property agent websites and mobile applications. 77.3 per cent of those searched for homes in neighbouring provinces have monthly income of between 2,000-5,999 yuan (US$$950), considered a mid-to-lower income group, and are predominantly male (90.4 vs 9.6 per cent females).
Average new home prices in Suzhou worked out at 18,100 yuan per square metre in April, and 12,800 yuan in Jiaxing, compared with 52,000 yuan in Shanghai, according to China Real Estate Price System. system.
Property investment, mostly land acquisition costs, grew 4 per cent in 2017 in Shanghai, and 5.7 per cent in Suzhou, but the growth in Jiaxing was a thumping 51.3 per cent. All three cities have buying eligibility restrictions, but those in Jiaxing are more relaxed.
The situation in mirrored in Beijing.
Of the total 7.2 million square metres of residential land sold there in 2017, 65 per cent was outside the fifth ring, according to Centaline Property, meaning they are at least 13 kilometres from Chang’an Avenue, the capital city’s east-west central avenue line.
Last July when a plot in Dongcheng district was sold, it created huge fanfare as it was the first plot in the central district to be sold in the past five years.
Residential property investment in Langfang, in Hebei Province, is the most sought-after for non-local Beijing residents, and grew 5.7 per cent in 2017, while in Beijing it fell by 11.6 per cent.
Analysts say people’s straight choice between urban second-hand, and further away new homes, will continue to dominate the relative sizes of the primary and secondary property markets in top cities.
It will also matter increasingly to the land acquisition strategies of developers, and if people are willing to compromise on quality in favour of location,developers risk building too many homes in far-off suburbs.
If people are willing to continue trading off on location, the country’s developers’ “city cluster” strategy – building homes in surrounding satellite cities – could prove a winner.
“In Beijing, due to high land costs, the new-homes market has basically become a sector that caters to rich people with large homes and a high per-square-metre price,” said Guo Yi, chief analyst with Beijing property agency Sysw1n.
“The secondary market has become a market for mainstream, middle class buyers, with subsidised homes and Hebei cities becoming more the choice of people on below-average incomes.”
In Beijing, Shanghai and further south in Shenzhen, sales of second-hand properties already exceed 80 per cent of total home sales.
In April for example, 1,161 new units were sold in Beijing, compared with 14,964 second-hand homes, according to Sysw1n.
In value terms, new home sales accounted for just 7.2 per cent of the month’s total market but in floor-space terms that figures jumped to 16.7 per cent, implying that an average new home is more than twice as large as an average second-hand one.
More people are settling to rent, too, giving up on their home-ownership dreams altogether.
According to Homelink, China’s largest property agency, 36 per cent of working people in Beijing, or 7.9 million individuals, now live in rented flats.
“For developers the implication is the leasing market has effectively reduced demand for new homes in the short-term,” said Chen Tiancheng, a property analyst with TF Securities, “though considering the asset value potential, people will still seek to buy a home after renting.”