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INVESTMENT: What Real Estate Investors Can Expect from the Jing-Jin-Ji Market Going Forward
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What Real Estate Investors Can Expect from the Jing-Jin-Ji Market Going Forward

By Michael Dow

BT 201601 060 21 Investment 002In recent years the Chinese property market has gotten everybody talking. From the turn of the century up until 2013 it was one of the most sensational bull markets of all time. Nowadays though this sector is much less of a guaranteed cash cow than it was before. In fact in many major cities it has been going in the opposite direction, with prices either falling or at best remaining stagnant. This hasn't been too much of a surprise given the broad economic slowdown, the drying up of credit and the tougher regulatory environment. Sure it is harder to make money from property these days but the party is far from over if you know what you're doing.

The last few months have been rough for the so called 'Jing-Jin-Ji' (Beijing-Tianjn-Hebei) area. The authorities are clamping down on dodgy speculators in the capital, while environmental woes and things like the tragic explosion in Tanggu continue to spook investors. Yet without a doubt we still have some of the best property prospects right here on our doorstep. Anyone who thinks that the boom regional real estate sector has come to an end is very much mistaken.

The first reason to be optimistic is that in spite of all the turbulence in the broader economy, the growth prospects of this particular area are still tremendously good in the medium to long term. Not only are Beijing, Tianjin and Hebei expected to continue to have strong GDP growth over the next few years but these regions are also highly likely to attract a disproportional amount of inward investment compared to other parts of China. As part of the central government's plan to integrate the Jing-Jin-Ji area and form a megalopolis that is five times larger than New York City there will be massive amounts of public capital flowing into both industry and infrastructure. This will create more jobs and give locals more spending power but more importantly for property investors, it will make the region a more attractive place to park money.BT 201601 060 19 Investment Highlight

We have already seen some surges of speculative capital entering into the Hebei housing market since the integration project was announced. At one point in 2014 there was so much interest in the area near Baoding Eastern Train Station that the average price of apartments went from 5000 CNY per square metre to 8000 CNY in just two weeks. Many of the potential buyers bidding up prices in this region are reportedly from southern Chinese cities like Shanghai, Shenzhen and Wenzhou. One such investor is Tong Yonghua, an entrepreneur from Zhejiang Province and head of the Zhejiang Business Association of Baoding, who told the Caixin news network that "Seven or eight of us association members have already put deposits down on some 50 apartments…This is the best opportunity in Baoding in years".

The bullishness of speculators like Tong is a testament to the attractiveness of this market at a time when the broader outlook is gloomier than it has been for a while. It is no exaggeration to say that the property market has a whole has lost a lot of its shine in the last couple of years. Instead people have been ploughing money into stocks. However, after last year's equity market crashes and the corrections we saw in real estate there is a good chance that a lot of investors will make their way back into the housing sector in 2016. In fact when you look at all the options there really aren't many other good choices out there at the moment. Stocks don't look all that appetising, interest rates are not exciting – particularly given that yields in safer markets like the U.S. are heading higher – and gambling on a yuan appreciation would be very risky indeed at the moment. With all that in mind the property market seems like a fairly logical place for the Chinese to park their money.

BT 201601 060 22 Investment 003The most important thing to find out is where exactly this capital inflow will go in the Jing-Jin-Ji property sector. As we've already seen the burgeoning cities of Hebei Province, particularly places like Baoding, Langfang and Gaobeidian, look set to do well in the next few years. So too will certain segments of the Tianjin housing and commercial property markets. That is in part because of pure economic growth, a continuation of inward investment and the price competitiveness Tianjin real estate has over Beijing. Even with the explosion last year, the pollution issues and so on it is still hard not to be bullish on this city. The next few years are undoubtedly going to be very good for the residents of Tianjin, and all being well it will be a very profitable period of time for investors too.

Property prices in the nation's capital are however going to be much trickier to predict going forward. On the one hand Beijing is still doing well in diversifying its industrial landscape, particularly its financial sector, and attracting capital that would otherwise be going into the more traditional Chinese investment hubs like Shanghai and Shenzhen. It is also benefitting from the growth of the surrounding cities and its ever improving transport system. In that regard the future looks fairly positive.

Then again though, the consensus amongst financial commentators is that there are still a lot of bubbles within the capital's property sector; some of which could burst dramatically within the next couple of years. And of course there is the persistent pollution problem. In December the government issued a red alert warning for the first time in the city's history. Clearly Beijing, and indeed this region as a whole, still has a long way to go in that regard. Therefore while real estate in the capital is still reasonably attractive in the long term it is perhaps more of a 'buy for the brave' than it is in the surrounding second and third tier cities.


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