(Dec. 21) Shenzhen is home to China’s highest property prices and lowest home ownership rates — and it’s a warning for other cities. A new generation of migrants are struggling over housing in Shenzhen, China’s answer to Silicon Valley. Rising from a tiny fishing village to a metropolis of about 22 million people in four decades, the city is a beacon for young workers dreaming of becoming the next Jack Ma, or at least joining the middle class.
Shenzhen’s traditionally loose hukou policy — which determines where people can settle in China — has attracted up to 500,000 new arrivals each year, a migration key to President Xi Jinping’s goal of making Shenzhen a tech powerhouse to rival the West. They come for jobs at the city’s biggest employers, from Huawei Technologies Co. to Tencent Holdings Ltd., and Ping An Insurance Group Co., whose 115-story tower rises above the city’s skyline across the river from Hong Kong.
Yet the boom has led to the highest property prices and lowest home ownership rates in China, a warning for the country’s other growing cities. The average two-bedroom unit now sells for about $900,000, in a city with per capita income of just $20,000.
With the cost of an apartment equal to 43.5 times a resident’s average annual salary, Shenzhen’s housing affordability is only a notch better than Hong Kong, the worst among 80 megacities, according to E-House (China) Enterprise Holdings Ltd., a real estate firm. As a result, just a third of Shenzhen residents own their apartments, less than half the rate of China’s other big cities like Shanghai, and lower even than the notoriously unaffordable U.S. tech hubs of San Francisco and Seattle.
While the Chinese government is concerned that the nation’s wealth gap and social inequality could lead to the type of upheaval seen elsewhere, the question is what to do about it. On a broader level, Shenzhen’s lack of affordable housing is emblematic of the income disparity that has jumped in recent years after the opening of the economy spawned billionaires like Ma yet threatens to leave more people behind.
“If Chinese cities continue to adopt this model of growth machine, discriminating against people with lower education and not particularly high skills, it could be really a big problem,” said Qiao Shitong, an associate law professor at the University of Hong Kong who has written about China’s housing challenges. “This social inequality is going to become a problem for Shenzhen and for basically all other Chinese cities.”
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