[photopress:Chongqing_Jindi_House_06.jpg,full,alignright]A longish, well-researched piece in the International Herald Tribune deals with the desirability of investing in second-tier cities on China. There was a recent meeting dealing with this held in Chonqing, ‘Second Tier and Beyond.’ Chongqing, (which some readers may remember as Chungking) a river port in Sichuan Province, is the largest of these cities.
Alan Liu, regional managing director for North Asia for the real estate company Colliers International, said, ‘For Shanghai or Beijing, the results are inevitably lower because it is more competitive. So when they go out to the second- or third-tier cities, they find the returns are a little higher.
‘If you run out of opportunities in the first-tier cities in China, you can go down a tier. It’s very much like development in the United States, where besides New York, Washington and Los Angeles there may be much more opportunity in Philadelphia, Minneapolis, you name it. I think there’s that similar model.’
Xavier Wong, head of research at the Knight Frank real estate office in Hong Kong, said to be considered in the second tier a city should have a population of about three million and a minimum gross domestic product that is the equivalent of US$2,000 per capita, although the income requirement is stretched for large cities whose residents have lower incomes, like US$1,363 in Chongqing. According to Knight Frank’s criteria, there are about 60 Chinese cities that can be considered second-tier or bigger.
The central government introduced rules in May and August aimed at cooling a red-hot market and forcing developers to focus more on affordable housing rather than the luxury end of the market that they had favored.
The main points require developers to allocate 70% of all new projects to units of less than 90 square meters, or 970 square feet. Likewise, 70% of the sites available for residential development are to be used for affordable units that are small or midsize.
Developers hope they will benefit from a long-running trend that will last for years across China, as a middle class emerges.