The Housing Market In Shenzhen, The Silicon Valley of China, Slows In 2017
There is a price correction in the city as the government tries to reduce the risk of a real estate bubble
The city of Shenzhen has been on the real estate radar for quite some time. It is known as the Silicon Valley of China. Many analysts consider this metropolis, the city of the future. In particular, its real estate industry is a booming one. In fact, property prices in Shenzhen have soared 76 percent since January 2015.
Chinese investors are highly attracted to this city for many reasons, including the rapidly developing capabilities for technological advancements as well as their real estate opportunities. But, there is much more to it. According to Samantha Culp, Shenzhen pretty much has it all. “Overnight, this sprawling urban Goliath north of Hong Kong has become an incubator for cutting-edge design, a rule-breaking tech hub, a bastion of next-gen urbanism, and a leading cultural capital. Plus, the food’s great and the weather is lovely.”
The meteoric housing market in Shenzhen is unique. Tech giants such as Huawei, ZTE and Tencent are housing their headquarters there. Shenzhen has become an immigration city. People are moving in search for living and working opportunities. Over 90 per cent of its residents are non-local, according to Bryan Chan, director of advisory services for South China at Colliers International.
From Sarah Zheng’s article in the South China Morning Post, she states that, average homes prices are three times higher than those in nearby cities (e.g. Guangzhou). The price averages around 55,000 yuan per square metre. In some cases, as it happens in any major real estate market, central districts are hot items. One could be looking at 100,000 yuan per square metre in locations such as Futian (the district is home to the government and Municipal Committee of Shenzhen, as well as the central business district of the city), around 96,000 yuan in Nanshan (the southwest area of the Shenzhen Special Economic Zone), and 60,000 to 70,000 yuan in Luohu (a full commercial city).
Even though, Shenzhen’s meteoric housing market has slowed in 2017, the risk of a bubble remains. The rapid growth as well as the surge of housing prices has made the government take action to prevent a future financial and housing crisis.
“The rapid rise in home prices in Shenzhen and other cities promoted the central government to introduce a new round of tightening measures in late September and early October, covering at least 21 cities. In Shenzhen, second home buyers now have to come up with at least a 70 per cent down payment, up from 40 percent, and further restrictions were applied for non-local residents.”, said Jex Ng, managing director of South China for Jones Lang LaSalle (JLL).
Meanwhile, Shenzhen represents a functional case for the Chinese government as an example of its transition from “Made in China” to “Designed in China”. The country wants to put their human resources into more productive industries, and everything that is happening in the city of Shenzhen is a representation of that. These new measures seem to have a positive effect in slowing the market down, yet the risk of a mild bubble is latent. The hope is to keep the current level steady in order to secure the ongoing success of the booming real estate industry in Shenzhen.
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