Location, Location, Location​

07/04/2017

Image: BWPI

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So the China property market is in a bubble I continue to hear. Property too expensive already. Well that didn’t stop convoys of Beijingers, armed with suitcases of cash, dashing out into the Hebei countryside to drop millions on real estate in the newly announced Xiong’an New Area, a special economic zone with parity to the Shenzhen Special Economic Zone and Shanghai Pudong New Area according to Xinhua News Agency.

News: Real Estate Frenzy Triggered
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Image: uk.reuters.com

​The housing market has been under tight restriction since October of last year when Government stepped in to cool overheating in 20 leading cities.  In Beijing, new rules required a down payment of 50% of the purchase on a second home for local residents, whilst non-local residents’ down payment would be raised to 70% or more. This February saw further credit restrictions on the payback period for mortgages.

Xiong’an represents opportunities outside the restrictions of Beijing, with huge potential gains to be made over the next few years both in and around the new area if it truly is to be developed as a new special zone. Third and fourth tier cities across the country have struggled with huge overcapacity of housing stock developed over the last decade, yet provincial capitals and first tier cities continue to show strong demand as the rural urban divide becomes more extreme.

A torn poster showing the original plan for Caofeidian Environmental Industries Park Image: Guardian

​Whilst large numbers of the Chinese population have cash to burn, without need for any credit financing, property remains the go to option. However with increasing difficulties in moving cash outside the country, new opportunities within China will continue to be attractive so long as the location is solid. First tier cities remain significantly below the purchase cost of other international world cities but rental yields remain low due to lack of affordability in the general population.

Caofeidian's eco-city Image: Guardian

​For Xiong’an the future looks bright, however the same could be said for Caofeidian, also in Hebei province, a special development area for recycling and scientific development mapped in 2005 to grow to 1 million population and become the country’s largest steel production base. Today it has joined the long list of ghost towns after the financing was withdrawn in a changing economy, despite government investment of nearly $US100 billion.