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Shenzhen property boom leaves HK in the dust

HONG KONG — Although Shenzhen was long the poor cousin of neighbouring Hong Kong, the property markets in the two cities are diverging as Hong Kong’s highly inflated real estate prices start to fall while Shenzhen surges ahead on the back of a technology boom.

HONG KONG — Although Shenzhen was long the poor cousin of neighbouring Hong Kong, the property markets in the two cities are diverging as Hong Kong’s highly inflated real estate prices start to fall while Shenzhen surges ahead on the back of a technology boom.

Housing prices in Shenzhen have jumped by more than 30 per cent in the year to date, making it the fastest-growing major property market in China, while asking prices for Hong Kong luxury flats have dropped by up to 5 per cent in the past three months.

The two housing markets’ deviating paths highlight the wider trends shaping the Chinese economy.

Despite the broad slowdown in China, Shenzhen is growing rapidly because its Internet and technology companies are expanding and attracting many ambitious graduates. The city’s Nanshan district, the heart of the city’s emerging technology industry, generates the highest gross domestic product per person of any Chinese region at US$48,000 (S$68,000) a year, more than Hong Kong and not far behind Singapore.

Meanwhile, Hong Kong’s more mature economy is feeling the effects of lower growth in the mainland, while its luxury goods and retail industries have been hit by President Xi Jinping’s corruption crackdown.

Ms Li Liangman, a 29-year-old who works for a construction company, moved from Beijing to Shenzhen three months ago to take advantage of the career prospects and much cleaner air.

“Life is good but the housing prices have really been shooting up,” she said while shopping at the city’s glitzy Mixc mall. “I’m not sure if I will be able to buy somewhere here.”

While property prices in many lesser Chinese cities have slumped in the past few years because of a credit binge and overambitious construction, the tier-one cities of Beijing, Guangzhou, Shanghai and Shenzhen have fared much better.

Shenzhen is leading the pack thanks to its more welcoming policy towards migrants from elsewhere in China and the fact it is home to established technology companies such as Huawei, ZTE and Tencent, as well as a growing number of successful start-ups including drone maker DJI.

Mr Jeffrey Gao, a property analyst at Nomura in Hong Kong, said that while second-tier cities on average have one year of housing inventory, the tier-one average is nine months and Shenzhen has about six months. “We’re seeing a lot of Hong Kong people buying in Shenzhen because, although prices are rising quickly, they are still maybe half or 40 per cent of what you need to pay in Hong Kong,” he said.

Hong Kong benefited from the rapid growth of the Chinese economy and relatively low interest rates over the past decade, said Mr Paul Louie, a property analyst at Barclays.

But that virtuous circle is turning into a potentially vicious one as China slows and borrowing costs look set to rise. (Hong Kong’s currency is pegged to the US dollar and the Federal Reserve is expected to begin a tightening cycle soon.)

Mr Asif Ghafoor, chief executive of Spacious, a property website based in Hong Kong, said that asking prices for apartments in Hong Kong’s more prestigious districts have dropped as much as 5 per cent in the past three months, while rents have dropped by as much as 11 per cent in some luxury developments.

While affordability is an issue for residents of both Hong Kong and Shenzhen, Mr Louie said one key differentiating factor is that buyers in Shenzhen are betting on strong wage growth in the years ahead, while Hong Kongers fear their salaries will stagnate as the economy struggles. FINANCIAL TIMES

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