Zhuhai Property Values

HuaFa in Border area was 13,500 now 10,000

don't have to look far, just look at the economy and/or stock market. It is in a dive and the bull market isn't coming back very soon. Expect a couple of years...

Real estate nationwide is also going into a slump. As fast as it went up, it will only come down just as fast (or faster). Bank on that...it's a cycle.

Zhuhai from what I've seen is purely a speculative play. And most folks who buy in Zhuhai are from out of town.

It will be nice to have some hard data on the prices....

I have seen some limited impact on Zhuhai housing market. Its growth is stilted but hardly in a dosedive! Compared to its surrounding areas like Macau, Hong Kong and Shenzhen, its housing price has not gone dramatically up hence no dramatic drop either.

The slump may help the local market to weed out speculators in building industry and further differentiate good quality from bad, good location from bad, so on and so forth.

I don't see any problem with out-of-town buyers since the population in Zhuhai is still rather small. I hope that more people from all over China including HK and Macau see the value of living/retiring in Zhuhai. Out-of-town buyers are NOT ALL speculators just as in-town buyers are NOT ALL first time homeowners. Even first time home buyers would love to see their equity rise rather than drop.

The stock market has come down more than 50% from its peak but I haven't see any report yet about loan defaults or panic selling of speculative properties in Zhuhai. It may take some time for sales to pick up, but the market is far from collapse.

If you have been hoarding money for so long, then it may be a good time to pick and choose, drive a hard bargain and get yourself something in whereelse but Zhuhai of course!

HuaFa new town 5th phase just launched on October 1st and I heard that the prices started from 7,000 upwards. A friend from Hongkong just bought a unit(180sqm) for 9,100 per sq meter during the launch.It would be interesting to know what has been the lowest(or the average) price transacted or the take up rate.Indeed most of the property prices have retraced from their peak seen during the first quarter of 2008. One of the main reasons why it came off was due to the fact that the local government stop the practise of issuing "Zuhai's Huokou"(household booklet) to other mainland chinese property buyers effective in May 2008.With the financial meltdown(Bear Steans, Lehman Brothers,Freddy Mae, Fanny Mae, AIG) in the USA this year, it would interesting to how this is going to affect the global economy in the next 3 to 6 months and thus property prices.If your investment horizon is medium to long term, indeed Zhuhai is one of the better cities to invest in.

@mek,

You are pretty much spot on about the cyclical nature of the Zhuhai real estate market. Let me see if I can fill in some of the detail. Before I go any further, however, let me put up this disclaimer. I do not now, nor ever have, claimed to be an expert on the Zhuhai real estate market in particular, or the Zhuhai economy in general. What I am about to write here are purely my own observations and assumptions. I do, however, tend to be either blessed or cursed (depending on your particular point of view) with a keen memory for past events and trends, and the ability to put 2 and 2 together and come up with 4 (sometimes 3 or 5, again depending on your point of view).

In 2002, when I was seriously looking at the local real estate market as a potential buyer, the two “hottest” properties in town were Horizon Cove (HC) and Phoenix Gardens (PG). The market for properties in and around Gongbei was pretty much stagnant. The big attraction(s) for HC were that the units were designed very much to western standards as opposed to Chinese standards, their size, their relatively low price (anywhere from 4200 to 6500 RMB per meter, depending on size and degree of built-in decoration), and HC’s proximity to the Zhuhai end of the proposed HK- Macau – ZH bridge. I remember the sales person at HC telling us that 20% to 25% of the “Phase 1” units had been bought by HK residents in the pre-construction phase. The big draw for PG was its in-town location (Xiangzhou), and its view of the sea. PG units (completely undecorated) were priced at anywhere from 5500 RMB to 7000 RMB per meter; depending on which floor, and on which side (east or west) of the buildings they were on; the most expensive units being on the upper floors facing east.

Indeed, there was a good amount of other residential building going on at that time. Many of the high-rise buildings along Lovers Road in Xiangzhou and Jida were then in various stages of construction; and there were a number of developments beginning to spring up along the coast road from Xiangzhou northward to Zhongshan University. At the same time, however, there were some very visible signs that the Zhuhai real estate market was not as “rosy” as many of the high-pressure real estate sales companies would have liked for everyone to believe.

There were, (and still are) an alarming number of derelict, abandoned, either unfinished, or unoccupied commercial buildings and residential developments all over the city. The most notable (because they are still in the same condition as they were in 2001) of these are: the derelict building next to the new clock tower building in Gongbei, the unfinished derelict building three blocks north of Jusco in Xiangzhou, the unfinished derelict building directly behind the Hita Plaza duty free shopping center in Jida, and the unfinished derelict “garden” of “villas” on Lovers Road in northern Gongbei. There are several others around town, but these (at least to me) are the most notable eyesores and monuments to the ever-present “guanxi” business system because they have been untouched for the last 8 years, and remain with us to this day.

As 2002 turned into 2003, residential real estate prices began to drop. The reason for this, as I was told by someone in the business, was that Zhuhai had been over-built, and that the SARS issue in HK was having an impact on the local Zhuhai market. Then, in mid to late 2003, the whole ballgame changed because of two significant events.

The first “game changer” happened in the summer of 2003 when Macau decided to break the decades old gambling monopoly in the region by offering gaming licenses to any organization, foreign or domestic, that could qualify and come up with the cash to purchase said licenses. Almost instantly, gambling interests in Las Vegas announced that they would be investing scores of billions of US$ into the development of new casinos in Macau. As far as Macau is concerned, the rest is history. The second big “game changer” came from HK a couple of months later, but it takes a bit of background description to put it in the proper perspective.

During mid-2003, HK was still reeling from the financial ravages of the SARS scare, and was desperately trying to pull its shattered economy, particularly its devastated tourist industry, back together. Until the aftermath of the SARS crisis, free travel in and out of HK and Macau for mainlanders was heavily restricted. Mainland citizens, if they wanted to visit HK or Macau had to either join an expensive “tour group”, or have a legitimate business reason, such as working on the mainland for a branch of a HK or Macau based company to visit either of the SARs.

This all changed in mid 2003 when both HK and Macau suddenly realized that the mainland was not just a source of potential illegal immigrants, but rather as a source of much needed revenue; and therefore removed virtually all previous restrictions to cross-border travel for mainland Chinese. Once these old travel restrictions were abolished, the Zhuhai real estate market, especially in and around Gongbei, exploded into an orgy of development and new construction.

I was back in the US from late 2003 until late 2006. During that time I maintained contact with several friends and former colleagues in Zhuhai via the internet for the entire 3 years I was away. I distinctly remember one conversation I had in mid 2004 with a dear friend (and member of this board) during which he told me that “This is certainly NOT the same Zhuhai you left last year. Housing costs have gone up by 25%, and the increase in traffic on the streets is unbelievable. Should you come back here, you won’t recognize the place.” He was correct.

When I returned to Zhuhai in December of 2006, I couldn’t believe my eyes. It seemed that new housing developments were being constructed on every square meter of available space. What had once been parks were now huge holes in the ground where new, high rise apartment buildings were being constructed and whole mountains were being excavated to make room for even more “luxury” high rise developments. I know that Zhuhai’s population is growing; but it is certainly not growing at a rate sufficient to fill all of the thousands of new and proposed housing units currently in the works, especially at the prices at which these new units are being offered.

There is absolutely no doubt in my mind that Zhuhai is being over-built and over-priced… again. When one combines this with the recent downturn in the manufacturing business in Guangdong, the devaluation of the HK$ against the yuan/RMB, the recent 100% increase in the down payment requirements for mortgages, and the recent restrictions on the number of Macau border crossings that mainlanders can make each month, is it any wonder that the previously rapidly increasing property prices in Zhuhai have leveled off, or, in some cases actually begun to decline? I don’t think so. I think that is pretty much of a “no-brainer”. Will real estate prices come back down to the pre-2003 levels? Certainly not! I firmly believe that those days of “bottom feeding” are long-gone.

All of this begs the question: Is this a good time for a laowai to invest in Zhuhai real estate? The answer is a resounding NO! This statement has nothing to do with the recent fluctuations in the Zhuhai real estate market. Indeed there may be some very attractive bargains out there these days; but it has everything to do with the instability and unpredictability in the visa/residence permit situation. How smart would it be for a laowai to make a significant investment in a Zhuhai property, only to be told in six months to a years time that “Sorry, but because of your age, or because of something that your home country did that hurt our feelings, or for some other “solid reason”, we are not going to renew your residence/work permits, so you’re going to have to leave China for some unspecified period of time. Have a nice day”.

Don’t get me wrong. I love living in Zhuhai. I have a really great job that I enjoy every minute of; and I hope to retire here some day. But, for the time being, I’m going to stay out of the local real estate market.

Again this rather long post is definitely NOT intended to be “China bashing” or “Zhuhai bashing”, but merely an articulation of how I see things through my eyes.

Cheers

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Up until now, I've had more problems in my life than a cub scout at the Neverland Ranch...

seems you guys all forget you don't "own" real estate in china, you just have 70 yrs land use right.

@sfkid,

Nobody is forgeting the 70 year land use thing. We use the term "own" in a much braoder sense.

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Up until now, I've had more problems in my life than a cub scout at the Neverland Ranch...

orrin, but owning the land is the fundamental factor in real estate, unless you want to broaden the meaning of "real estate" also.

how about the following scenario: if i paid 1 million rmb for my apt in 2008, how much will you pay me for it in 2078?

Unless you buy your apt. when you are 5 years old or younger, I don't think it really matters that much. Otherwise why would anyone buy a place in China?

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Up until now, I've had more problems in my life than a cub scout at the Neverland Ranch...

i am trying to point out the common fallacy people have associated with china "real estate". it should be treated like a depreciation asset since you don't own it, its true value should only be tied to the time left on the usage right.

but unfortunately, the chinese general public don't see this, so china "real estate" becomes an investment vehicle, for long term appreciation or short term speculation.

@sfkid,

I'm sorry, but you are wrong about the "usage right". Every time a "property" is sold the 70-year "clock" resets to zero. Secondly, "depreciation asset" is a contradiction in terms. Because the 70-year clock resets every time the property changes hands, the value of the property will be determined by local market forces.

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Up until now, I've had more problems in my life than a cub scout at the Neverland Ranch...

FYI
quote : Houses and land in Hong Kong

Buying land in Hong Kong is a more difficult feat than purchasing condominiums or apartments. Firstly, the government owns nearly all of the land and can at its whim release parcels of that land for sale, thereby affecting the market directly. Land cannot be purchased freehold, but rather on a renewable leasehold basis. Land leases are presently being granted for 50 years, though in the past they have been issued for 75, 99, or 999 years Unquote.(source http://www.property-report.com/hongkonginfo/)

As can be seen Hk's property is 50 years and it didnt stop anyone from buying did it ?
would be interesting to know what are situations in other countries like USA, France etc etc

How bad is real estate market?
18 deposit on Horizon Heights.
That is all 4 buildings.

For those who are interested, I just came back from the sales office of HuaFa, seems the take up rate of the 5th phase launch is quite strong. The salesperson said that the takeup rate is above 70 pct. there is a big board in the main area where all the units available and sold are displayed(if I am not wrong, price per sq meter for each of the units are indicated as well).

They actually advertise the price/m2? It would really be great if someone close by could do a little recon on that and report back.

Considering Huafa had over 3,000 registered buyers & only sold about 300 out of 400 units up for sale, I would hardly consider that a strong launch. Look for prices to drop further once they place additional units for sale.

The starting price is 7.5k sqm with average price at about 9k sqm

orrin, you and most chinese were getting some really bad infos from real estate agents whose integrity and knowledge of laws shouldn't be trusted. for awhile, i was also confused about how chinese land lease and renewal works. until i did some research myself, this may help:
http://www.ftchinese.com/story.php?lang=en&storyid=001013298

"When China's new property law was announced this spring, it was the ideological and political implications that drew the most commentary, both domestically and abroad. The implications on the ground for China's multi-billion-dollar property industry were largely overlooked.

Undeniably, China's property market has been in need of a clear legal framework since land use regulations were first reformed in the early 1980s. In recent years, the astronomical growth of China's economy has resulted in a boom in real estate developments all across the country.

These range from shopping malls for the masses to villa complexes for the newly super-rich. In this heady environment, massive sums of international capital have poured into China through investment funds run by big operators such as Deutsche Bank, Goldman Sachs and Morgan Stanley.

The legislation could have long-term implications on all these investments, but it is far from clear whether the property law will provide the stability investors and developers desire when it takes effect in October.

From a developer's standpoint, there are a number of shortcomings to the legal status quo. Despite phenomenal growth in the property market in recent years, the legal framework has lacked clarity and consistency. Specifically, ownership rights, land-use rights and mortgage regulations are widely viewed as arbitrary, restrictive or even non-existent. In addition, registration processes are overly complicated and inconsistent.

The new property law promises to correct many of these shortcomings. Land-use rights will be renewed, ownership rights will receive stronger legal protection and the parameters of mortgages have been broadened. However, ambiguity as to how the promises related to land use would be fulfilled has left property developers waiting cautiously before breaking out the rice wine.

Previously, land-use rights were restricted to 70 years for residential property and 40 years for commercial property. The new law will allow for renewal of these rights at expiration, but it is not clear how long the extensions will run. It is expected that the second term for residential properties will run for 70 years, but for commercial properties there is speculation that the renewals may be as short as five years and be subject to re-evaluation from the government. This could pose problems for certain businesses, such as hotels, that will have difficulty arranging for sale financing or rehabilitation financing, which commonly use land use rights as security.

Yet another area that will need to be clarified is how local and regional governments will process the renewal of land-use rights. There is reason to believe that these governments may extract additional payments when setting terms and conditions for renewal. In the short term there is little likelihood that these issues will be resolved, as the first round of renewals for commercial properties are not due for another 20 years.

This October, when the new property law takes effect, there are many aspects that will be clarified through implementation. In the short term, there is no doubt that this law represents a considerable improvement in the legal status for developers. However, it is the details surrounding the renewal of land-use rights that will determine the long-term prospects for property developers in China and their investors. The real estate market in China will certainly be an interesting place to be a property developer or investor while these issues are ironed out."

so, the first owner of the apartment pays for the 70 yrs lease upfront when he buys it new from the developer, it's included into the sale price. if it's sold, the next owner will have the land lease for whatever yrs left on the 70. until it run out after 70 yrs, the owner at the time will have to pay for the next 70 yrs land lease to the government at the prevailing market rate.

depreciation asset it is...