In Yanjiao, a town about 40km east of downtown Beijing, David Wu found a new way to settle a Rmb 13,000 ($2,048) a month mortgage he could no longer afford to pay. .
Instead of listing his three-bedroom apartment for rent or sale, the 32-year-old office worker, who earns Rmb7,000 a month, offered to give it away to anyone willing to bear the cost.
Four years after Wu bought the apartment for Rmb 3.9 million and then rented it out for Rs 2.5 million a month, the property is valued at under Rs 1.5 million and the rent is still flat. inching.
“I thought I could make money on the investment,” he said. “It has become a nightmare.”
Wu is one of many property owners in Yanjiao, once an investment hotspot thanks to its proximity to the capital, who stumbled across the town’s decision in 2017 to impose some sales restrictions. the nation’s most difficult to limit real estate speculation.
For Beijing’s economic policymakers, the danger is that Yanjiao’s past could be China’s near future. President Xi Jinping has successfully cooled many of the country’s hottest real estate markets as part of a campaign to offer “common prosperity“. But property prices could fall even further – and faster – than governments would like, depressing economic activity across the board.
China on Monday reported that gross domestic product grew at its slowest pace in 18 months in the fourth quarter of last year, up 4% from the 6.5% increase achieved in the same period of 2020. Quarterly growth improved to 1.6%, compared with an adjusted 0.7% in the July-September period. according to data from the National Bureau of Statistics.
“Many Chinese cities can follow Yanjiao [into a] Dan Wang, chief economist at Hang Seng Bank of China, said.
The story of Yanjiao’s rise and fall begins a decade ago, when the town became a popular destination for Beijing house hunters who couldn’t afford a home. At the time, property prices in the capital were several times higher than in the town just across the border in Hebei province.
“Demand for housing has increased in Yanjiao after Beijing [prices got] out of reach,” said Wang Chengdong, a local real estate agent.
Between 2010 and 2020, Yanjiao’s population doubled to 630,000.
As migrants flooded the farming town that was once a farming town, so did the speculators. Brokers Yanjiao say a home sell-off took hold in 2015 as Beijing eased credit controls to boost the economy.
According to E-House China, a Shanghai-based real estate consulting firm, sales of new homes in Yanjiao, by floor space, increased 150% from 2014 to 2016. Wu said: “Everybody thinks the housing spree is going to last and the only direction for property prices is up.
However, in 2017, the Yanjiao government announced that only residents or migrant workers who had lived in the town for at least three years could buy a home there.
Transactions fell about 80% in both 2017 and 2018 before having a moderate recovery. “The tightening of the policy has reduced our clientele from people around the country to a much smaller group of Yanjiao natives, many of whom already own multiple homes,” said Wang Chengdong.
The real estate slump has put the finances of local governments under strain. Sanhe, the city that administers Yanjiao, is expected to report a nearly 50% drop in land sales for 2021 after a 30% decline in 2020, according to a recent government statement.
According to several people familiar with the government’s policy response, Yanjiao recently stopped enforcing a ban on purchases by suburban residents but has not made the decision public. As a result, transactions and prices remained down at the end of last year.
“The government did not let too many people know about the new regulation for fear of triggering speculation,” said Wang Chengdong. “But how can you stimulate sales without doing [the policy change] widely known? ”
A Sanhe city official said the purchase restrictions remained unchanged.
As Yanjiao’s housing problem continues, more and more real estate investors are struggling with mortgages that far exceed the market value of their apartments. While some distressed homeowners, such as Wu, are offering their apartments free of charge to anyone willing to take out a mortgage, others have already defaulted.
According to official data, foreclosures in Yanjiao increased from 150 in 2019 to 823 last year. A local bankruptcy court judge, who requested anonymity, said he was struggling to keep up with the workload.
“I stopped giving free tours of foreclosures,” the judge said. “There are too many of them.”
Additional reporting by Maiqi Ding in Beijing
