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There is hardly any traffic on the 37km stretch of highway from Zhengzhou airport to the city centre. But the roadsides are jammed with billboards promoting new residential complexes, building materials and construction equipment.
Far from the red-hot property markets of Beijing, Shanghai, Shenzhen and Guangzhou, the first signs of real estate fever are beginning to emerge in this small agricultural and textile-manufacturing outpost.
Zhengzhou is the capital of Henan, a largely poor inland province whose walk-on role in the mainland’s economic growth story mostly has been to supply surging coastal port cities with migrant labour.
The building boom under way in Zhengzhou is part of the city’s aim to become the regional economic hub of central China.
Property prices have soared in recent months, fuelled by investors and speculators, many of them from outside the district. It has some real estate analysts worried there is a property bubble in the making.
To damp speculation in Beijing and Shanghai, local governments have banned people from taking out loans to finance more than two homes in those two cities.
So, “it is not surprising that investors who cannot get mortgages to buy their third home for speculation and investment have now been lured to tertiary cities”, says Jack Rodman, the president of Beijing-based consultancy Global Distressed Solutions.
There are no official figures on second- and third-home ownership on the mainland, but Rodman estimates that the average resident who owns property in Beijing, Shanghai or Guangzhou now owns three homes.
In Zhengzhou, rows of cranes dot the skyline, seemingly outnumbering the trees. The local government and property developers that it has teamed up with are halfway finished building a RMB150 billion (RM67.2 billion) area named Zhengdong New District which, when completed, will have two financial centres, 15 universities and multiple residential complexes.
With land increasingly difficult to secure in the most coveted cities, national property developers are starting to move into mid-tier cities like Zhengzhou, bringing a first wave of real estate speculators with them.
For instance, Evergrande Real Estate Group, the country’s largest developer by land bank, is building a residential project, its first in the city. And Greentown China Holdings is working on five sites in the Henan capital, comprising a hotel, an office tower and three residential blocks.
As he serves up a banquet of delicately spiced Hangzhou cuisine, washed down with an Australian shiraz, Wang Yong, Greentown’s Henan district head, says all the apartments in the company’s “Lily” complex of 2,256 units in Zhengdong New District have been sold. The complex was completed in December.
He adds that 30% of the apartments in the complex, which features several residential towers clustered around landscaped gardens and an artificial waterfall, were sold to investors instead of owner-occupiers.
And even though the “Lily” is less than eight months old, Cao Yue, who works for Greentown’s marketing department, says “some of the units have been bought and sold two or three times already”.
The apartments are now worth RMB6,000 a sq m, Wang says, equating to RMB600,000 for a 100 sq m unit. He estimates that if Greentown had built the complex in 2005, the units would have sold for about half that amount.
Greentown’s apartments, which are on the edge of the new district, are at the lower end of the housing market in Zhengzhou.
Chen Yu, a real estate agent in Zhengzhou, says that a year ago prices of apartments in the more desirable centre of the city’s new district ranged between RMB6,000 and RMB7,000 a sq m. Today, he says some apartments are selling for as much as RMB12,000 a sq m.
About 300,000 homes in Zhengzhou New District have been completed and sold. Many of those were bought by investors from the wealthier province of Shaanxi, the country’s coal-mining heartland south of Beijing, and Wenzhou, a light goods-manufacturing city south of Shanghai, developers and government officials say.
Many citizens view real estate as a more attractive place to stash their savings than investing in the stock market, or in relatively low-yielding bank deposits that are not keeping pace with inflation.
And it is no wonder investors are flocking to places like Zhengzhou, given the way prices have also soared in the country’s more expensive first-tier cities.
According to international property consultancy Jones Lang LaSalle, the price of luxury apartments in Beijing rose 67% on average in the year to June, hitting almost RMB40,000 a sq m. For investors who are just starting to dabble in real estate, far-flung locations such as Zhengzhou offer a much cheaper alternative.
Still, property investment in Zhengzhou could prove to be a dangerous bet. Prices already are at a level where speculators may have to rely on future speculators to take properties off their hands, considering the costs are out of the reach of most locals.
The average wage of non-agricultural workers in the city is just under RMB30,000 a year, according to a payroll survey by foreign direct investment consultants Dezan Shira & Associates, which has offices around China. The typical Zhengzhou resident with a full-time job would have to save his or her entire salary for almost 17 years to buy an entry-price, RMB500,000 home in the new district.
On that measure, central Zhengzhou is now nearly as unaffordable as Beijing, where the average apartment costs 22 times the average wage, according to a Beijing University of Technology report cited by state media in July.
Hu Baosen, the chairman of Henan developer Central China, strongly denies the Henan capital is showing the first signs of a housing bubble. “There is not much speculation going on here,” he maintains.
The Henan native, who wears a modern adaptation of a traditional Tang dynasty shirt, waxes on about how Luoyang in Henan became China’s capital during the latter years of the Tangs’ rule in the 10th century. He says he thinks his province can be restored to its former glory, with Zhengzhou becoming a buzzing financial and service sector hub. And that, he argues, will lift local salaries and draw migrant workers back to the city with their savings.
“Each time someone moves or returns here for work, that is another 40 sq m of housing demand,” Hu says. “In five to eight years, Zhengzhou may be a commercial centre for the central part of China.”
The rapid urbanisation, though, has dislodged some long-time Zhengzhou residents and altered their traditional ways of life. Local authorities say they already have rehoused 100,000 villagers to make way for new projects.
In a sun-baked fishing village on the outskirts of the city, fisherwoman Chen Xidi, who lives in a windowless, ramshackle, one-storey brick cottage, is preparing to move.
Developers will start building the Zhengdong New District’s second financial centre next year on the site of Chen’s small plot of land and those surrounding it. Around Chen’s fishing community, no one is protesting.
The 42-year-old woman, whose weathered face makes her appear much older, says she looks forward to receiving government compensation for her land and moving to an apartment. (Planning officials at the local authority declined to say how much compensation the villagers are getting.)
But Chen has no idea what she will do in the future. “Maybe I will be a cleaner,” she muses. — SCMP
Far from the red-hot property markets of Beijing, Shanghai, Shenzhen and Guangzhou, the first signs of real estate fever are beginning to emerge in this small agricultural and textile-manufacturing outpost.
Zhengzhou is the capital of Henan, a largely poor inland province whose walk-on role in the mainland’s economic growth story mostly has been to supply surging coastal port cities with migrant labour.
The building boom under way in Zhengzhou is part of the city’s aim to become the regional economic hub of central China.
Property prices have soared in recent months, fuelled by investors and speculators, many of them from outside the district. It has some real estate analysts worried there is a property bubble in the making.
To damp speculation in Beijing and Shanghai, local governments have banned people from taking out loans to finance more than two homes in those two cities.
So, “it is not surprising that investors who cannot get mortgages to buy their third home for speculation and investment have now been lured to tertiary cities”, says Jack Rodman, the president of Beijing-based consultancy Global Distressed Solutions.
There are no official figures on second- and third-home ownership on the mainland, but Rodman estimates that the average resident who owns property in Beijing, Shanghai or Guangzhou now owns three homes.
In Zhengzhou, rows of cranes dot the skyline, seemingly outnumbering the trees. The local government and property developers that it has teamed up with are halfway finished building a RMB150 billion (RM67.2 billion) area named Zhengdong New District which, when completed, will have two financial centres, 15 universities and multiple residential complexes.
With land increasingly difficult to secure in the most coveted cities, national property developers are starting to move into mid-tier cities like Zhengzhou, bringing a first wave of real estate speculators with them.
For instance, Evergrande Real Estate Group, the country’s largest developer by land bank, is building a residential project, its first in the city. And Greentown China Holdings is working on five sites in the Henan capital, comprising a hotel, an office tower and three residential blocks.As he serves up a banquet of delicately spiced Hangzhou cuisine, washed down with an Australian shiraz, Wang Yong, Greentown’s Henan district head, says all the apartments in the company’s “Lily” complex of 2,256 units in Zhengdong New District have been sold. The complex was completed in December.
He adds that 30% of the apartments in the complex, which features several residential towers clustered around landscaped gardens and an artificial waterfall, were sold to investors instead of owner-occupiers.
And even though the “Lily” is less than eight months old, Cao Yue, who works for Greentown’s marketing department, says “some of the units have been bought and sold two or three times already”.
The apartments are now worth RMB6,000 a sq m, Wang says, equating to RMB600,000 for a 100 sq m unit. He estimates that if Greentown had built the complex in 2005, the units would have sold for about half that amount.
Greentown’s apartments, which are on the edge of the new district, are at the lower end of the housing market in Zhengzhou.
Chen Yu, a real estate agent in Zhengzhou, says that a year ago prices of apartments in the more desirable centre of the city’s new district ranged between RMB6,000 and RMB7,000 a sq m. Today, he says some apartments are selling for as much as RMB12,000 a sq m.
About 300,000 homes in Zhengzhou New District have been completed and sold. Many of those were bought by investors from the wealthier province of Shaanxi, the country’s coal-mining heartland south of Beijing, and Wenzhou, a light goods-manufacturing city south of Shanghai, developers and government officials say.
Many citizens view real estate as a more attractive place to stash their savings than investing in the stock market, or in relatively low-yielding bank deposits that are not keeping pace with inflation.
And it is no wonder investors are flocking to places like Zhengzhou, given the way prices have also soared in the country’s more expensive first-tier cities.
According to international property consultancy Jones Lang LaSalle, the price of luxury apartments in Beijing rose 67% on average in the year to June, hitting almost RMB40,000 a sq m. For investors who are just starting to dabble in real estate, far-flung locations such as Zhengzhou offer a much cheaper alternative.
Still, property investment in Zhengzhou could prove to be a dangerous bet. Prices already are at a level where speculators may have to rely on future speculators to take properties off their hands, considering the costs are out of the reach of most locals.
The average wage of non-agricultural workers in the city is just under RMB30,000 a year, according to a payroll survey by foreign direct investment consultants Dezan Shira & Associates, which has offices around China. The typical Zhengzhou resident with a full-time job would have to save his or her entire salary for almost 17 years to buy an entry-price, RMB500,000 home in the new district.
On that measure, central Zhengzhou is now nearly as unaffordable as Beijing, where the average apartment costs 22 times the average wage, according to a Beijing University of Technology report cited by state media in July.
Hu Baosen, the chairman of Henan developer Central China, strongly denies the Henan capital is showing the first signs of a housing bubble. “There is not much speculation going on here,” he maintains.
The Henan native, who wears a modern adaptation of a traditional Tang dynasty shirt, waxes on about how Luoyang in Henan became China’s capital during the latter years of the Tangs’ rule in the 10th century. He says he thinks his province can be restored to its former glory, with Zhengzhou becoming a buzzing financial and service sector hub. And that, he argues, will lift local salaries and draw migrant workers back to the city with their savings.
“Each time someone moves or returns here for work, that is another 40 sq m of housing demand,” Hu says. “In five to eight years, Zhengzhou may be a commercial centre for the central part of China.”
The rapid urbanisation, though, has dislodged some long-time Zhengzhou residents and altered their traditional ways of life. Local authorities say they already have rehoused 100,000 villagers to make way for new projects.
In a sun-baked fishing village on the outskirts of the city, fisherwoman Chen Xidi, who lives in a windowless, ramshackle, one-storey brick cottage, is preparing to move.
Developers will start building the Zhengdong New District’s second financial centre next year on the site of Chen’s small plot of land and those surrounding it. Around Chen’s fishing community, no one is protesting.
The 42-year-old woman, whose weathered face makes her appear much older, says she looks forward to receiving government compensation for her land and moving to an apartment. (Planning officials at the local authority declined to say how much compensation the villagers are getting.)
But Chen has no idea what she will do in the future. “Maybe I will be a cleaner,” she muses. — SCMP
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 823, Sep 13-19, 2010
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