Seven arrested for real estate violations in Xiongan
Seven people have been arrested for real estate violations in the recently announced Xiongan New Area, sending strong signals to investors that the government intends to fend off risks from distortions in the property market, according to analysts.
The preparatory committee for Xiongan New Area, a transitional group founded on Saturday, has discovered 765 cases of real estate violations and shut down 71 sales offices, according to an announcement it made on Wednesday.
The announcement came after homebuyers flooded into the quiet, less developed area in Hebei province over a couple of days after the central government announced on Saturday its decision to choose three counties — Xiongxian, Rongcheng and Anxin — as the location of the new area to solve pollution and congestion problems in the capital.
The local government issued an order on Saturday banning all house sales in the area.
“The area will implement the most stringent control of the real estate sector,” Zhao Kezhi, party chief of Hebei province, said on Tuesday.
“Punishing illegal activities in accordance with laws and exposing these cases to the public in a timely manner will help to warn others ,” Z ha os aid.
A homeowner in Xiongan, surnamed Wang, said a potential buyer, a retired woman from Beijing, hesitated to purchase her house after the announcement.
Wang bought the 160square-meter house for 5,700 yuan ($840) per square meter six years ago, but she hopes to sell the house for 30,000 yuan per square meter.
“The recent property frenzy in Xiongan is apparently not supported by people who are willing to make long-term investments to help drive regional growth,” said Yan Yuejin, a senior researcher at E-house China R&D Institute.
Yan expects the government to expand controls to more areas in the real estate sector in the near future, including selling and purchasing rural homestead land, because there are still many speculators betting on price surges when local policies for land sales have yet to be introduced.
Looking ahead, punishment and strict controls would not put things right once and for all, according to Wu Hequan, deputy head of the expert advisory committee on the collaborative development of Beijing, Tianjin and Hebei under the State Council.
“The local government needs to find ways that would work in the long run to make housing affordable for talented people,” Wu said.
On Saturday, the central government announced its plan to create Xiongan New Area in North China’s Hebei province, as part of its measures to push “inclusive development” of the Beijing-Tianjin-Hebei region in a coordinated manner.
The move is expected to have a significant bearing on the country’s future development, and many people have drawn parallels with the Shenzhen Special Economic Zone and Shanghai’s Pudong New Area, the country’s two most important economic hubs that have spearheaded the prosperity of the Pearl River Delta and the Yangtze River Delta, and which are deemed to have been successful test beds and drivers for the country’s reform and opening-up initiative.
What is worrying, however, is that even before a concrete development blueprint for the new area has been revealed, a large number of investors, from within Hebei and beyond, have swarmed into the region, which includes three counties in Hebei that are about 100 kilometers south of Beijing, to buy flats in anticipation of profiting from rising property prices. As a result, the prices of apartments in these counties have reportedly doubled, even tripled, in just three days after the plan for the new area was announced.
The white-hot real estate market in the planned new area has prompted many to lament the loss of the spirit of entrepreneurship in today’s China. They argue that in the early days after the launch of the Shenzhen Special Economic Zone in 1980, many of the country’s ambitious young people traveled a long way to what was then a small undeveloped county seat in South China’s Guangdong province. Unlike the speculative asset investors swarming into Xiongan today, many of those newcomers in Shenzhen sought to launch their own businesses, beginning with just very small workshops. The trailblazing spirit of those entrepreneurs is thought to have helped lay a solid foundation for the success of Shenzhen today.
Although this sentiment is not without foundation, as the property hoarding wave in today’s Xiongan is in stark contrast with the entrepreneurship in Shenzhen three decades ago, fingers should not be pointed at the speculative investors in Xiongan. Although their speculative purchases certainly must be stemmed, as the authorities are rightly seeking to do, they are simply pursuing the highest profits, which is the natural logic of the business world.
The changing business environment for start-ups is actually behind the different mentality of people in Shenzhen many years ago and Xiongan today.
Back in the 1980s, China had just begun its reform and opening-up and sent the first encouraging signals to private business. Shenzhen as a new special economic zone enjoyed many preferential policies, such as tax cuts, low-priced or even free land, and easy market entry, thus attracting the first batch of courageous people with a pioneering spirit to move to the ever ballooning city to pursue their Chinese Dream.
Over the next three decades, the Chinese economy developed to become the world’s second-largest. China’s real estate sector then started to take off in the early 2000s and its development accelerated after 2010, with housing prices continually soaring in large and mid-sized cities, helping real estate developers and investors make great fortunes that would not have been possible otherwise. As a result, more and more business owners in traditional manufacturing sectors have shifted to property investment to make money.
Although their speculative purchases certainly must be stemmed, as the authorities are rightly seeking to do, they are simply pursuing the highest profits, which is the natural logic of the business world.
Meanwhile, as housing prices continue to rise, many people find it financially very difficult, if not entirely unaffordable, to start a new business now, because the rent, plus the rising cost of labor (highly influenced by rising rent), constitute a heavy burden for them.
Even before the Xiongan New Area plan was released, there were large numbers of real estate speculators wandering around every corner of the country, especially the major cities, in search of real estate investment opportunities. So it is not surprising they instantly rushed to Xiongan once the news was released on Saturday.