Beijing resident Hu Yongwei has recently made a strategic move in the real estate market by purchasing over a dozen apartments in the small central Chinese city of Hebi. Hu believes these properties, acquired at a low cost of $31,000, will offer greater financial rewards compared to other investment options. With a focus on two- or three-bedroom apartments built about 30 years ago, Hu has continued to invest in the market, spending 18,000 yuan ($2,528) to acquire his 15th property in Hebi. Hu’s decision to avoid the stock market is influenced by his family’s negative past experience. The decline in property prices over the past two years in Hebi and other smaller Chinese cities, such as Huainan, Rushan, and Gejiu, has attracted purchasers, primarily those living outside these locations.
While the purchases in smaller cities may not have a significant impact on China’s extensive real estate market, they do indicate signs of life in this sector that has been facing a downturn and a sluggish economy. This trend is emerging at a time when China’s overall property market is experiencing a decline, with slower growth in new home prices and a substantial fall in property investment.
Buyers like Hu are enticed by the remarkably low prices of second-hand apartments in these smaller cities. For instance, Hu paid just 1,000 yuan (excluding taxes and fees) for one of his apartments in Hebi. The prices in these areas are currently 27% lower than their peak in 2021, according to data from Anjuke, one of China’s leading real estate platforms. Similarly, prices in Huainan, Rushan, and Gejiu are up to 24% below their previous highs. In contrast, top-tier cities like Beijing have only experienced a 1.5% decrease in second-hand home prices over a six-year period until May 2022. Chongqing, a tier-2 city, recorded a slightly higher decline of just over 10% in home prices over five years.
Real estate agents in these smaller cities have observed that the majority of buyers are from out of town. These buyers range from speculators who have no intention of residing in the purchased apartments to individuals seeking affordable retirement options and young people looking for inexpensive housing. The attraction to these smaller cities can be attributed to the high living costs in larger cities, prompting young individuals to opt for affordable homes and the concept of “lying flat,” where individuals pursue a minimalist lifestyle. Moreover, individuals near retirement age are drawn to cities like Rushan due to their coastal locations and affordable living expenses.
Despite the increasing interest in low-cost properties in smaller cities, analysts are cautious about drawing overly optimistic conclusions. China’s economy continues to grapple with the aftermath of COVID-19 lockdowns, resulting in weak consumer sentiment, low domestic demand, and high youth unemployment rates. The surge in purchases of low-cost flats could be attributed to cautious behavior and a lack of confidence in future income stability.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
