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Much ado about low housing prices in some cities

By Yan Yuejin | China Daily | Updated: 2019-04-24 08:10

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Hegang, a small fourth-tier city in Northeast China's Heilongjiang province, has become a buzzword on the internet because some news reports have said that one can buy an apartment there for as little as 20,000 yuan ($2,982), which is not enough to buy even 1 square meter of housing in most of the first-or second-tier cities.

The local housing management has responded to the sensational news saying that housing prices in Hegang have been generally steady, while the extremely low housing prices are limited to particular types of housing.

The average housing price in Hegang, although relatively low, is about 3,000 yuan or more per sq m. So, one cannot buy an apartment there for 20,000 yuan under normal circumstances. Besides, homebuyers have to pay a comparatively high decoration cost, which in turn means the "cost performance ratio" of such houses is actually not high.

Also, the listed price is not the same as the actual transaction price. The listed prices for some houses seem to be cheap, but the transaction process includes many hidden-and generally high-costs.

Admittedly, the 3,000 yuan per sq m housing price in Hegang is very low. But it is reflective of the actual housing market in many cities in Northeast China. For instance, in nearby Shuangyashan, a city similar in size to Hegang, the housing price is the same as in Hegang because of the slow demise of the once booming coal-mining industry there. In such cities, the real estate markets are sluggish and housing prices low, because the demand for housing is weak due to the shrinking industries and population scale.

A document the National Development and Reform Commission issued on April 8 on the key tasks of new type of urban construction this year referred for the first time to the concept of "contraction-type city".

Many resource-deficient cities, mainly in the northeastern part of the country, can be described as contraction-type cities. After the coal and oil resources these cities' economic development relied on exhausted-and some mining industries were closed for environmental protection reasons-local industries began declining, leading to population outflow. As a result, many potential homebuyers in Northeast China chose to purchase housing in China's southern cities such as Sanya, Hainan province. Moreover, many of the northeastern cities could not promote their image aggressively enough to attract investment, which further harmed the local development environment and weakened the real estate market.

The local governments in contraction-type cities should make more efforts to raise their cities' competitiveness by, among other things, increasing infrastructure construction in order to make them more habitable and thus more attractive to homebuyers.

And given the limited resources they have, such cities should take measures to develop into "compact-type cities", in accordance with the NDRC document. In compact-type cities, the authorities should control land transactions and urban development, so as to draw more residents, businesses and consumers to the central area, which will help them to better develop the urban areas. In addition, these cities should also develop cultural and tourism industries to attract more tourists and vitalize the local real estate market.

The author is director of Shanghai-based E-house China Research and Development Institution. The views don't necessarily represent those of China Daily.

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