Dongguan, the city with the fastest increase in home prices across China, is offering a co-sharing investment plan to buyers to spur home ownership in a move that resonates with the state’s “common prosperity” campaign.
The local government will start building homes under a joint ownership plan soon, where buyers can split the cost with a state-owned vehicle and take possession of the unit. Buyers will have an option to buy out the state in five years at a 20 per cent discount on the prevailing market price.
This easy ownership scheme is intended to fill real demand for housing from the working population in the city, the local government said on its website last week. It will also address growing concerns about runaway property prices, a constant irritant to the central government in its efforts to douse speculation in the US$2.7 trillion housing market.
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“Dongguan is setting a very good example to all other cities on how to give access to people with real housing needs and with less purchasing power, instead of deep-pocketed speculators,” said Yan Yuejin, director of E-house China Research and Development Institute in Shanghai. “When everyone can afford a home, it is common prosperity.”
Dongguan, which borders Shenzhen in China’s southern Guangdong province, is a victim of its own success, having transformed from a low-value manufacturing hub into a base for high-technology companies such as carmakers.
Huawei Technologies set up its research and development (R&D) facilities in Dongguan in 2018, bringing more than 10,000 employees and a host of ancillary companies. Smartphone makers Oppo and Vivo also followed by starting their R&D centres there.
That has resulted in a population boom, which has driven up property values. Average home prices in Dongguan surged nearly 30 per cent last year, the most among major mainland Chinese cities, according to a research unit of the Chinese Academy of Social Sciences.
They have risen another 8.5 per cent this year to 19,826 yuan (US$3,065) per square metre, according to Anjuke, an online property portal. The median salary of workers in the city is 3,845 yuan, according to an online recruitment platform.
The co-ownership scheme is seen as timely. Home prices could rise more as demand rises. Dongguan officials have unveiled a plan to grow the city’s population by 27 per cent to 10.8 million by 2035, a big leap from the 200,000 gain between 2017 and 2019.
The Dongguan plan is akin to a scheme in the UK known as “shared-ownership” or “help-to-buy” properties. It came as President Xi Jinping on August 17 called for a system that attends to the needs of the less wealthy to spread the benefits of China’s economic success.
The Dongguan government said homebuyers will pay 50 per cent of the price while a vehicle under the Dongguan State-owned Assets Supervision and Administration Commission will pay the other half. Homeowners can buy the 50 per cent stake from the state unit after five years at a 20 per cent discount.
“Dongguan’s reform offers the average people in the city a chance to live in their own homes,” said Yan. “The overheating housing market in the city can be cooled down when people with real demand can buy such homes.”
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