Shenzhen — one of China’s four Tier I cities — is located in south China’s Guangdong Province and sits just to the north of Hong Kong. From 2013-2015, the city’s office market experienced significant growth, which resulted in rents skyrocketing. The office market boom is now translating into considerable demand for housing as more white collar workers settle into new higher paying jobs. Additionally, looser monetary policy and the stock market volatility during 2H15 lured tremendous demand from speculators and upgraders into Shenzhen’s housing market.

The rapid growth in housing demand has seen average home prices in the city’s primary sales market increase dramatically. Over the past year, home prices in CBD areas such as Luohu, Futian and Nanshan have increased by 66% while prices in suburban areas such as Bao’an, Longgang and Yantian have grown by 77%. Despite the stronger growth, the price gap between suburban and CBD areas remained as wide as 34% in 1Q16[1].

The surge in suburban home prices has been fuelled by first-time homebuyers and upgraders looking for more affordable housing. Interestingly, it’s not just Shenzhen’s suburban areas that are benefiting from the strong demand. Nearby cities, including Dongguan and Huizhou, have also seen home prices rise significantly over the past year.

Dongguan and Huizhou already have convenient transport infrastructure linking the cities to Shenzhen, including high-speed railways and expressways. Connectivity between the cities will be further boosted with the completion of the upcoming Shenzhen-Dongguan metro line, which will shorten the travel time from these cities to Shenzhen CBD areas from 60 minutes to about 30-45 minutes. Zhongshan City, which lies to the west of Shenzhen across the Pearl River, is also starting to draw the interest of homebuyers. Upon the completion of the Shenzhen-Zhongshan Bridge in 2020, the travelling time between Zhongshan City and Shenzhen’s Nanshan CBD will be cut from the current 1.5-2 hours to as little as 40 minutes; putting it within an acceptable commuting distance for some of Shenzhen’s workers.

Chart: Shenzhen districts and surrounding citiesSource: JLL

The UK Office for National Statistics suggests that the maximum home-to-work travelling time for workers to retain their life satisfaction is 45 minutes[2]. On this basis, areas within this ‘commuting radius’ should see sustained demand for housing. We have seen that working in CBDs but living in satellite cities is already a popular trend for many migrants in other large Chinese cities such as Beijing and Shanghai, and we foresee the likelihood of a similar phenomenon emerging in Shenzhen. As a result, we expect housing prices within this 45-minute commuting radius from Shenzhen’s CBDs to be well supported over the medium-to-longer-term.

[1] Urban Planning, Land & Resources Commission of Shenzhen Municipality.
[2] Office for National Statistics. (2014). Commuting and Personal Well-being. ONS 2013a.

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