There’s a big land-buying frenzy happening in Asia right now.
But you won’t hear about it in the news.
It’s the same kind of buying spree that took place in Beijing in 2003, shortly after the city won its bid to host the 2008 Olympics. That set off a bull market in Beijing that sent property prices up 400 percent between 2002 and 2010.
This time around, it’s quietly happening in the Greater Bay Area (GBA) Initiative – a special economic region comprised of nine municipalities in China’s Guangdong province, as well as Hong Kong and Macau. The region has 69 million people and an economy as large as that of Russia – the world’s 12th largest economy.
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|The point of the GBA Initiative is to create a single, giant economic hub, and to make Shenzhen – China’s technology centre – like the Silicon Valley in the San Francisco Bay Area. Only the GBA Initiative is three times the size of the San Francisco Bay Area.
It’s a huge market filled with high-income, high-spending consumers. And they’ll be connected by a complex web of road, air and railway infrastructure, as well as an ultra-fast mobile communications network, speeding up the pace of doing business.
So far, most of the development in the Greater Bay Area has been centered around four key regions: Hong Kong, Macau, Guangzhou and Shenzhen.
According to investment bank DBS, real estate prices in Guangzhou have nearly quadrupled since 2006. Prices in Shenzhen have risen more than fivefold, while prices in Hong Kong have gained nearly 300 percent.
The buying frenzy is spreading to smaller cities
Over the past year, China’s biggest property developers have spent US$16.2 billion buying 15 million square metres of real estate in the nine municipalities that are part of the GBA. These are the smaller cities that have been largely left out of the property boom.
That works out to about US$1,080 per square metre for an area that’s four times as large as Central Park in Manhattan.
About one-third of all the land bought by these developers is in Foshan, a city that’s 175 kilometres northeast of Hong Kong, with a GDP just one-third that of Guangzhou or Shenzhen.
Just six months ago, traveling from Hong Kong to Foshan involved a three-hour bus ride (plus a lengthy wait to get through border immigration).
But in September, the Guangzhou-Shenzhen-Hong Kong Express Rail Link opened. This bullet-train service travels at speeds averaging 200 kilometres per hour, and cuts the travel time between Hong Kong and Guangzhou from three hours to just 50 minutes.
From there, travelers can take a second line to Foshan that will take an additional 20 minutes.
This has helped turned Foshan, a once-sleepy manufacturing hub for air conditioners and refrigerators, into a bustling and modern city filled with skyscrapers, shopping malls and apartment buildings. It’s now an alternative home for millions of people who can no longer afford to live in Shenzhen and Guangzhou.
In 2017, approximately 150,000 people moved into Foshan. That created demand for 50,000 new homes – equivalent to 125 forty-story buildings.
The same is happening in smaller GBA cities like Zhaoqing and Jiangmen, where real estate is in greater supply and they’re now easier to get to because of better roads and railway infrastructure.
|Brian Tycangco is an investment analyst based in Manila, Philippines. He is co-editor of Strategic Wealth Confidential and editor of Extreme Growth Trader. Brian has worked in the financial field for more than two decades, and specializes is uncovering the best little-known opportunities within the Asian equities markets. He began his career as a stockbroker before joining BNP Paribas, one of Europe’s largest banks, as an equities analyst. Prior to joining Stansberry Pacific Research, Brian worked for the longest running investment newsletter in Asia, and built a track record of more than a dozen double- and triple- digit gains.|