Shenzhen is costly, yet upside looks good

The research arm of China’s leading open-platform real estate listings portal, Beike, recently released its latest index on the growth potential of property markets across the country. Shenzhen was ranked No. 1, for two main reasons: 1) a relatively low homeownership rate; and 2) an “open attitude towards newcomers”.

The list ranks China’s top 100 cities based on a range of indicators, including policy trends, industrial clustering, urbanization growth and achievement, population flows and GDP per capita. 

Shenzhen was followed by Beijing and Shanghai. Guangzhou fell into fifth place behind Hangzhou, followed by Suzhou, Nanjing, Wuhan, Xiamen, and Tianjin in Top 10. 

The rest of the GBA cities made it, too. Zhuhai was ranked 22nd, Dongguan 27th, Foshan 32nd, Huizhou 33rd, Zhongshan 34th, Jiangmen 68th, and Zhaoqing 93rd.

Perhaps unsurprisingly, expensive Shenzhen has the lowest homeownership rate of all 100 cities on the list – under 50% – and a plentiful supply of rental housing. This has provided a “buffer zone” for the city’s future housing development, according to Xu Xiaole, chief market analyst of Beike Research. 

Xu added that thanks to the city’s openness to newcomers, Shenzhen has strong potential for population growth, which, naturally, equates to high potential for housing demand. Beijing and Shanghai, by comparison, have homeownership rates above 60%, and they are not seeing their populations boom at anywhere near Shenzhen’s rate. With more than half of Shezhen’s urban population living in rental housing they, together with newcomers attracted by Shenzhen’s subsidies for talented individuals, are a strong force to support the city’s property market in the years to come. 

Clustering is another factor favoring Shenzhen. In other words, having strong property markets nearby supports the leader of the cluster, too. Within the top 20 cities, nine belonged to the three urban clusters, led by the top three cities of Shenzhen, Beijing, Shanghai. 

Three urban clusters home purchase capacity index :

The above table shows that the purchasing capacity within each cluster is more balanced in the Shenzhen-led circle. Shenzhen and Guangzhou have the largest capacity, while Zhuhai, Dongguan, Foshan, Huizhou and Zhongshan have similar capacity in the middle, with Jiangmen having the smallest. 

Xu said the capacity differences within each cluster have largely to do with the regional economic development model and its property market characteristics. 

The Shanghai and Shenzhen clusters have had a more balanced development than the Beijing cluster, with the core cities exerting their pulling effect better. As a result, there’s better integration and coordination among the cities in the Shanghai and the Shenzhen clusters. 

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