Arthur takes a brief look at the recent property frenzy in Xiongan, China.
Until January 2017 when house prices in the majority of the Chinese property markets began to fall, China’s property bubble had been experiencing unprecedented growth, culminating at a staggering 40pc in 2016. In the first half of last year, it was estimated that one fifth of China’s GDP growth was made up by its construction and real estate sectors. Despite ongoing fears that the property bubble is about to burst, China’s recent plans to incentivise economic growth and add to its massive urbanisation drive by developing a new area called Xiongan has caused a frenzy amongst homebuyers who are all to keen to invest…
Xiongan is located in the “mega region” developing in the area around Hebei, Tianjin and Beijing, in the northeast of China. Due to problems related to the overcrowding in the capital, authorities are looking for ways to create new economic hubs outside of these overpopulated areas, with the intention of encouraging people to live further afield. The precise details of the authorities’ complex development plans for the region have not generally been made public, but it is known that an assortment of major state-owned enterprises have pledged their support and participation in the construction of this new area.
As China’s economic model has changed over recent years to develop a much stronger service sector, its population has increasingly used property as a key investment vehicle (much like the UK). It is no wonder, therefore, that after the Chinese government announced plans for Special Economic Zone (SEZ) extension of Beijing on April 1st, investors descended upon Xiongan in full force. A recent Guardian article reports that within hours of the government’s announcement, property prices in the Xiongan had nearly doubled as thousands of homebuyers rushed in to buy property they hoped to re-sell at a profit. Amidst the frenzy and with the aim of preventing overwhelming speculation, the Chinese government have been forced to put a temporary ban on property sales in Xiongan.
The Beijing government are looking to make ecological improvements to the wetland area surrounding Xiongan in order to enhance transport networks and relocate industry, universities and hospitals. Arthur will be following any news and updates on the development plans and its effects on the property market in the near future.