A tale of two cities in China’s Jiangxi province
While the property market in the capital of Nanchang is flat, prices in new satellite towns are rising despite the lack of facilities
In Jiulonghu, a new town 15km southwest of Nanchang’s old downtown, rows of unfinished buildings and cranes dot the skyline, and the brand new boulevard is devoid of people.
At first glance, it might look like another one of the “ghost towns” that have become pervasive across China – but it’s not.
Local resident Zhou Ming bought an apartment here three years ago when the price was about 5,000 yuan (HK$5,900) per square metre. Now the price has surged to about 9,000 yuan. “Most of the homes are empty now, but are sold out. Soon people will move in,” he said.
This new town has been made possible with the relocation of the Jiangxi provincial government, the planned subway lines, and Dalian Wanda Group’s 400 billion yuan Wanda Culture and Tourism City. The residential units offered the Wanda’s project were so popular that some people failed to secure units when the sale began.
The average price at the Wanda project at the end of May was 9,800 yuan per square metre, up from 9,000 yuan in early May, according to information service portal Fang.com.
Homes in Jiulonghu, a nascent residential zone with incomplete public facilities, boasts prices that in some cases exceed those in the more established downtown.
In Honggutan, another fledging new zone located northwest of old downtown, home prices exceeded those in the downtown long ago – they currently range from 10,000 to 20,000 yuan. Big name property developers such as Greenland, China Resources and Shimao have crowded into the area.
Nanchang, the capital of Jiangxi province famous for its porcelain, copper and revolutionary past, is one of several of China’s poorer second-tier cities that have outperformed peers in the past six months, when the property market downturn in second and third-tier cities prompted governments to ease lending policies.
Following instructions from the People’s Bank of China in February, Jiangxi’s government rolled out 20 easing measures to stimulate the market, including a lower 20 per cent down payment for first-time homebuyers.
The looser down payment requirement, compared with 30 per cent in first-tier cities, has increased purchasing power for young first homebuyers, who often also receive financial support from their parents.
“Young people can’t afford the prices. They mainly rely on their parents’ savings for the first home,” said Yang Qing, a Nanchang resident for 45 years.
With a population of 5.3 million people, average home prices in Nanchang in May rose 5.25 per cent from a year earlier to 9,190 yuan per square metre, according to China Index Academy, a property research institution.
That means it would take 28.8 years for an average wage-earner to buy a 100-square metre home compared with 69.6 years in Beijing and 75.8 years in Shanghai.
Chen Xiao, a local public servant who has followed the market for years, said while prices in similar cities have experienced abrupt rises and falls over the past two to three years, Nanchang prices have largely been flat. The deciding factor, he said, is net population flows, which in Nanchang’s case has only been a small inflow.
This is in contrast with smaller cities in the province. Shi Qiang, general manager of a brokerage in Yichun, a small city in Jiangxi, said Nanchang has seen the least pressure to sell its housing stock compared to other cities in the province. It would take 7 months to deplete Nanchang’s stock based on current monthly sales, while in Yichun it would take 24 to 36 months.
The root cause, according to Shi, is that cities like Yichun have seen a large population outflow combined with a glut of land supply during the past few years. Prices have dropped from a peak of nearly 6,000 yuan per square metre in 2013 to more than 4,000 yuan now, leaving local developers with slim profits.
Provincial governments have encouraged local governments to subsidise migrant workers buying homes in cities. But Shi said the policy has not materialised at the local level, adding that the bleak situation will not change in the foreseeable future.
“Unless local government stops selling land and approving new projects, the situation is unlikely to change. But they can’t do that because without that they wouldn’t have revenue,” he said.