Dongguan, the city with the highest home price gains in China last year, is likely see prices increase further this year amid an influx of talent as more hi-tech firms set up operations in the Greater Bay Area city.
Property prices in the city of 8.5 million rose 29 per cent last year, according to a housing index compiled by a research unit of the Chinese Academy of Social Sciences. Shenzhen ranked second with a 23 per cent increase, and Ningbo in eastern Zhejiang province came third, registering a 16 per cent gain.
Analysts expect the momentum to continue, citing higher land prices. “Property prices in Dongguan will for sure continue to rise in 2021,” said Li Xingwang, an analyst at Hopefluent Research Institute. “On the one hand, demand still exceeds supply. On the other hand, lots of land plots that were auctioned last year had pretty premiums and the gains in land prices will definitely affect home prices.”
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The city sold 42 plots of land for 60 billion yuan (US$9.3 billion) in 2020, a 66 per cent jump from the previous year.
Home prices rose across China because of the unprecedented amount of liquidity unleashed by the central bank, but the surge in Dongguan has been backed by fundamentals.
Dongguan’s ambition to move up the value chain from churning out low-value added goods to a hi-tech manufacturing base has resulted in thousands of workers moving to the city, fuelling demand for property. Between 2017 and 2019, the city’s population grew by 200,000. The city officials plan to boost the population by another 27 per cent to 10.8 million by 2035.
Among the tech juggernauts that have moved to the city is Huawei Technologies. The company set up R&D facilities in 2018, bringing more than 10,000 employees and a host of ancillary companies. Smartphone makers Oppo and Vivo also followed suit by starting R&D centres here.
In the Songshan Lake area where Huawei is based, home prices have already topped 50,000 yuan per square metre, while prices in the downtown areas are generally above 30,000 yuan per sq m.
Speculative demand is also pushing prices higher. More expensive home prices in the first-tier bay area cities of Shenzhen and Guangzhou have prompted speculators to seek cheaper properties that have the potential to rise. Dongguan’s development outlook and its location, a 30-minute drive from Shenzhen or Guangzhou, add to its appeal.
The Dongguan government has intervened to cool the euphoria, but it has not had the desired effect. In some of the toughest measures unveiled by the local authorities in July, houses cannot be sold within three years of buying, non-locals are banned from buying homes without showing proof of paying social security funds for at least a year, and any household that owns two homes is disqualified from purchases.
Runaway housing prices have already inflicted some negative impact on Dongguan’s economy. Retail sales in the city dropped 6.6 per cent year on year in 2020, as pricey home prices undercut consumption. Its economy expanded by 1.1 per cent last year, lagging the nation’s 2.3 per cent growth.
Additional reporting by Pearl Liu
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