The new commuter belt

Good for property values

Bengbu, once a sleepy city in Anhui, now has one of the hottest property markets in China. Thanks to the Beijing-Shanghai high-speed rail link, the average home price in the city has reached Rmb4,800 per square metre, compared with just Rmb1,700 in May 2005. Each day, 47 express trains will stop in Bengbu.

With the new line opening this week, Bengbu looks set to be a major beneficiary.

Cai Wei, sales manager of a property company in the city told CCTV: “As the railway is about to be launched, the number of customers from outside Bengbu city has increased by 40%. And residents of Bengbu who work outside the city are coming back to buy properties.”

Similarly, in Jinan, the capital of Shandong province, property near high-speed track has also been selling at a premium.

“All apartments will certainly be sold out before the high-speed line opens, and prices will double soon. You cannot miss this chance,” a salesperson for one new condominium project in the city told a reporter from Japan’s Nikkei.

Even Dezhou, a smaller city in Shandong, is seeing a spike in prices. Local official Ji Yongjun told the Straits Times that the shorter commute to Beijing is the major reason for the increasing interest in the city’s property market. After the high-speed rail link opens, it will take only 57 minutes to reach Beijing from Dezhou, says Ji.

Another big believer is Vincent Lo, the tycoon who owns Shui On and is famed for developing Shanghai’s Xintiandi area. That was a huge success, and his next big project is called The Hub. Adjacent to Shanghai’s high-speed train station, Lo spent $495 million to buy the site, which will feature offices, shops and a hotel. The developer predicts it will emerge as a new business district for the Yangtze River Delta region. Why? 75 million people live within a one-hour train ride of The Hub. In fact, by 2020, high-speed rail is expected to connect more than 250 cities, with a combined population of about 700 million. Commentators say this will help create a much more mobile Chinese workforce, opening up new options for commuting to work. But the biggest winners could be third-tier cities, many of which lack the transport connections of their larger peers. As this situation improves, they will likely see much more of a boost in property prices too, compared with first and second-tier cities where prices are already much higher, says China News Service.

The railway policymakers will be hoping to see property prices rise near key stations, analysts say. That’s because they have adopted the Hong Kong for railway financing, which allows the rail operator to sell sites in and around stations as a way of subsidising the network’s construction. Hong Kong’s government-owned MTR Corp partners with developers to build homes, offices and malls around its various stations. In fact, MTR is now one of the biggest landlords in Hong Kong, owning 2.8 million square feet of shop and office space in the city. “I see that people prefer living on top of train stations because of the convenience,” Bryant Lu, vice-chairman of Ronald Lu & Partners, a Hong Kong architecture and design firm, told the South China Morning Post. “I see such towns developing in China in the coming years. That’s the most efficient model we have in the world.”

With estimates of the cost of China’s high-speed rail now breaching $300 billion, property sales look like becoming a crucial contribution to making the new network financially viable.

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