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China’s housing boom is not only happening in the traditional Tier-1 cities, or what many Chinese refer to as Bei-Shang-Guang-Shen. Many other Chinese cities have an overheated market, sometimes even worse than the four metropolitan giants. Here are three booming Chinese property markets according to sales price indices from China’s National Bureau of Statistics (NBS). Reviewing their recent developments sheds a light on some common traits of China’s hottest real estate markets.
Xi’an
On NBS’s list, Xi’an has the fastest growing primary market between 2015 and 2020. With a cumulative price increase of 80.1% in new properties, Xi’an grew faster than the four metropolises. Xi’an has been the capital of several Chinese dynasties, and its cultural significance did not wane with modernity. The city still welcomes droves of tourists every year with its millennia-old relics such as the Mausoleum of Emperor Qin, and toothsome delicacies such as the roujiamo. The economy is supported by a competitive manufacturing industry producing equipment for aerospace, electronic, military and other high-tech industries.
As the starting point for the ancient Silk Road, Xi’an is delegated ambitious roles in the Belt and Road initiative. Shaanxi provincial government envisions Xi’an to be an international “hardware hub”, hosting technology exchanges between China and other countries. The city also boasts the country’s most extensive freight train network carrying the heaviest load with its 15 lines, reaching 45 European cities including Milan, Mannheim and Vienna. Xi’an already has a vast foreign business presence. The prospect of attracting more foreign businesses and deep embedment in the international supply chain boost homebuyers’ confidence that Xi’an’s economy will continue to expand.
Qujiang New District, Xi’an during Chinese New Year (Source: dameishaanxi.com)
Xuzhou
Close on the heels of Xi’an is Xuzhou, a tier-2 city whose 73.3% cumulative price hike in the primary market outpaced all Tier-1 cities. Located at the crossroads of Jiangsu, Shandong, Henan and Anhui provinces, Xuzhou has been a logistics, finance and transport hub in east China. Ranked fourth in terms of accessibility by China’s high speed rail (gao tie), Xuzhou is highly attractive for regional businesses.
In the 13th 5-year plan announced by the Chinese Communist Party in 2015, Xuzhou was designated as the core city in the Economic Belt along East Longhai Line and an important node in the Belt and Road initiative. Since December 2015, 600 freight trains have departed from Xuzhou to Moscow, Almaty and Tashkent. A new freight train connecting Xuzhou and Hamburg just started operating two weeks ago and extended Xuzhou’s train route to Western Europe.
Grand plans to boost the city’s GDP and the city’s strategic role in the Belt and Road initiative drew a slew of capital from buyers in other provinces. Prices have been rising in a 57-month streak as of writing. After the Golden Week in October, authorities announced new price controls aiming to curb primary market speculation in Xuzhou and Xiaoxing. Tighter measures are expected to be the norm across the country in the next few months, as covid recovery in China is widening the wealth gap.
Xuzhou’s skyline from across the Feihuang river (source: Government website of Xuzhou)
Nanjing
While Xi’an and Xuzhou have a booming primary market, their secondary markets are more in line with those in other cities and lag behind those of Bei-Shang-Guang-Shen. Shenzhen’s secondary market, for instance, increased by 83.6% since 2015. Nanjing, on the other hand, saw a demand spike in both primary and secondary markets where prices have grown more than 50%. Nanjing is the subcenter (after Shanghai) in the Yangtze delta city belt and the capital city of Jiangsu province, the second richest province in China. While the city is a major industrial centre traditionally supported by four heavy industries - petrochemicals, steel, electronics and automobiles - the Nanjing government has plans as early as in 2014 to phase out heavy industries because of over-pollution. The transition to advanced industries, such as software and alternative fuel vehicles is supported by high-quality universities and great connectivity with the rest of the country, both of which are partly legacies from Nanjing’s past as the capital of six Chinese dynasties.
Private sector is weak in Nanjing, and its wage growth has been slower than neighbouring cities such as Suzhou and Wushi. Nanjing’s property market is propped up by demand for the city’s top school and Nanjing residents who work in tech hubs as Shanghai and Hangzhou where private sector presence is more prominent. The heated secondary market has much to do with the strict price control in the primary market, which is loose in Xi’an and did not exist in Xuzhou before October this year. Price control dampened supply of new units and led to frequent oversubscription. As the primary market became harder to access, buyers moved to resale markets which sustained growth there.
A residential project in Pukou District, Nanjing. Over 10,000 buyers competed for 223 units in May 2020. (source: xhby.net)
What’s in common between these three cities?
In terms of economic structure, the three cities don’t sound much different from the rest of the country - all are investing into IT industries. In a more nuanced way, Xi’an is a hardware hub, Xuzhou is a regional business hub, while Nanjing is encouraging the development of “urban industries” which includes technology and handcraft. All three of them have been benefited by the Road and Belt Initiative like many other Chinese cities.
Put them on a map and many commonalities stand out. They are all in east China and are located midway between Beijing and Shanghai. Their top-notch transport networks provide them excellent accessibility by the rest of China and easy integration into the national support chain. Having a great talent pool themselves or being able to tap into those nearby support their shift to a service/ knowledge-based economy. Being close to Zhejiang and Jiangsu, the two richest provinces in China, also makes them the natural first stop for rich buyers from small towns, those who are mocked on the internet as “tu hao”.
Creative industries happen in “hubs” because proximities facilitate knowledge transfer. Until our current video conferencing apps truly puts distance to death, IT boom will only happen where big cities are. In China, this means the digital economy will be largely concentrated in the east where Bei-Shang-Guang-Shen can spill over talent and knowledge easily. Eastern cities will see sustained though more tamed price growth in given the current robust demand.
