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    In China’s Most Expensive Cities, a Push to Build — and Sell — Cheap Homes

    Price and location will be key in determining the attractiveness of the new homes for prospective buyers.
    Jan 22, 2024#property

    Two of China’s megacities in the southern Guangdong province have recently begun building the country’s first large-scale batch of affordable housing for sale, aiming to make it easier for low- and middle-income households to own their own homes.

    China’s urban commercial housing prices have soared in the last two decades, making housing increasingly unattainable for many low- and middle-income households. In response, the government has made building affordable housing a priority, with the goal of making it a greater proportion of the overall housing supply. 

    In August, the State Council announced a nationwide push to build affordable housing for sale. The government sets the price of these units, and they cannot be rented out or resold in the commercial market once they are sold.

    Guangdong’s provincial capital, Guangzhou, has plans to build no fewer than 10,000 units of such homes in 2024, with 12 projects in total. The first project, which broke ground on Jan. 13, is expected to be completed in May 2026, supplying more than 200 homes.

    Shenzhen, the country’s third-largest city by GDP, began construction of new affordable housing on Dec. 28, with over 10,000 units expected to be built from a total investment of around 12.5 billion yuan ($1.74 billion).

    The housing mainly targets two groups: those with low incomes who have trouble finding housing and in-demand workers in industries such as tech, healthcare, and education.

    China’s social housing system has historically been made up of rental-based housing targeting low-income groups and public housing with shared ownership aimed at homebuyers unable to afford commercial housing. 

    The introduction of affordable housing for sale will help meet low-income people’s different housing needs, according to a spokesperson for the Ministry of Housing and Urban-Rural Development.

    The push is being spearheaded by large cities, where problems of unaffordable housing prices are most prominent.  

    Some smaller cities have also announced affordable housing-for-sale projects. Fuzhou in the eastern Fujian province received a 10-million-yuan loan from the China Development Bank to build 700 units in December, while Nanning in the southern Guangxi Zhuang Autonomous Region has plans to build 4,000 units this year.

    Though none of the cities have so far disclosed the prices of the new housing units or requirements to be a qualified buyer, the Ministry of Housing spokesperson said that prices should follow the principle of “cover costs and small profit”: high enough that local government debts are not worsened, and low enough to be affordable for prospective buyers.  

    In order to avoid property speculation, local authorities should shift from having affordable housing targets based on the number of units built to the actual number of people helped, said Yan Yuejin, a research director at the E-House China R&D Institute in Shanghai. 

    According to Yan, weak demand in the commercial market despite falling housing prices suggests that the new batch of affordable housing for sale would have to be priced lower than before and be situated in good locations to be attractive to prospective buyers.  

    Officials have signaled their awareness of this challenge, with the ministry spokesperson calling for affordable housing for sale to be situated in areas with convenient transportation and “relatively complete” public facilities to avoid long-term vacancies. 

    In Shenzhen, the projects cover large parts of the city’s central areas, including Futian District and Bao’an District, while in Guangzhou, the city government has indicated it will build affordable housing in former “urban villages,” the renovation of which is another major pillar of the central government’s overall strategy to reform the real estate sector. 

    Shanghai housing officials have also said they will investigate the possibility of constructing the city’s first batch of affordable housing for sale this year. 

    Editor: Vincent Chow. 

    (Header image: VCG)