Low cost ‘like cabbage’ flats in some Chinese language cities draw patrons, and warning


By Liangping Gao and Marius Zaharia

BEIJING/HONG KONG (Reuters) – Beijing resident Hu Yongwei purchased greater than a dozen flats within the small central Chinese language metropolis of Hebi for about $31,000 in all, betting they are going to be financially extra rewarding than different investments.

Hu, who principally acquired two- or three-bedroom flats constructed about three a long time in the past, spent 18,000 yuan ($2,528) this month in buying his fifteenth property in Hebi, the place costs have plunged during the last two years.

“The flats had been offered very cheaply, like cabbage,” the 39-year-old stated, including his household’s unhealthy expertise with the inventory market has made him avoid shares.

Actual property brokers stated low-cost flats in smaller Chinese language cities equivalent to Huainan and Rushan within the east, and Gejiu within the southwest, are additionally being purchased, largely by individuals dwelling outdoors these places.

The offers show that patrons are beginning to flip their consideration in the direction of smaller cities in China the place property costs are a number of the most cost-effective within the nation after years-long declines amid a wider sector downturn and a sluggish total financial system.

Whereas the small-city purchases usually are not important sufficient to affect China’s large actual property market, and knowledge on transaction volumes just isn’t accessible, they however point out {that a} tiny nook of the crisis-hit sector is exhibiting indicators of life.

The offers come at a time the image for China’s property market is getting darker. New residence costs rose at a slower tempo in Might and property funding fell at its quickest in additional than 20 years, knowledge confirmed.

For patrons with the means to get again into the market, the rock-bottom costs of second-hand flats within the smaller cities have been laborious to withstand.

Hu paid a surprisingly low 1,000 yuan excluding taxes and costs for one in every of his flats in Hebi. Based on knowledge from Anjuke, one in every of China’s largest actual property platforms, costs are 27% off their 2021 peak in some areas within the metropolis.

Equally, costs are as a lot as 24% beneath their prime in elements of Huainan, Rushan and Gejiu.

By comparability, costs in top-tier Beijing, the place a mean second-hand residence can value tens of 1000’s of yuan, fell simply 1.5% over a six-year interval to Might this yr, whereas in tier-2 metropolis Chongqing, they fell a bit greater than 10% over 5 years, in line with Reuters calculations primarily based on Anjuke’s knowledge.


Actual property brokers stated patrons within the small cities are principally from out of city. They vary from speculators who don’t have any intention of dwelling within the flats, to youth searching for an inexpensive place to “lie flat”, a Chinese language time period for doing simply sufficient to get by, to individuals on the lookout for inexpensive retirement.

In Huainan, “a lot of the patrons usually are not locals”, stated Zhao, an agent who solely gave his surname as a result of he was not authorised to talk to media. “Because of excessive dwelling prices in huge cities, younger individuals come right here to purchase low-cost homes and lie flat.”

In Rushan, agent Liu Yong stated most patrons are from elsewhere in China, aged 40-to-50 and trying to arrange their retirement by the ocean. An agent in Gejiu stated patrons intention to maneuver there as a result of the price of dwelling is decrease.

Analysts, although, are reluctant to attract bullish conclusions from the house purchases in these small cities given broader indications the world’s second-biggest financial system is struggling to select up from COVID-19 lockdowns.

Client sentiment stays beneath the vary set over the previous 20 years. Home demand is weak as shoppers and corporations desire paying down debt to investing. And youth unemployment is at a document excessive of above 20%.

“The truth that there are such a lot of individuals shopping for low-cost flats in smaller cities displays warning,” stated Hwabao Belief economist Nie Wen. “Persons are not assured about their future revenue.”

($1 = 7.1643 Chinese language yuan renminbi)

(Modifying by Muralikumar Anantharaman)

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