Although the supply of housing in third-tier cities was excess in recent years, the progress of de-inventory is good. In terms of the number of months of stock available for sale, the figure of third-tier cities has fallen from its high level of 30 months to 20 months, while stocks in first-tier and second-tier cities are less than one year. Under normal circumstances, if the stock is less than one year, the current supply can support property price growth, so the inventory of third-tier cities is now considered as healthy.
Although the quality of the projects in third-tier and fourth-tier cities is not as high as those in first-tier and second-tier cities, the housing market in third-tier cities benefit from the expensive home prices in the first-tier cities, which results in workers unable to afford a house and thus buying one in nearby third-tier cities instead. For example, Zhongshan, which is close to Guangzhou, has attracted many buyers in recent years. Its home prices are still relatively cheap compared to its neighbours. Apart from being sought by workers in nearby cities, Zhongshan houses are also popular among investors. Eastern District is the new downtown of Zhongshan City. The district has a landmark financial center, luxury properties, as well as many malls that young people like. The housing price of Eastern District is the most expensive in the city, of around RMB 9,900 per sqm, 17% higher than the average price of Zhongshan.
Many investors rushed to the Zhongshan market in the past few years, due to its geographical location— bordered by Zhuhai to the south, near Guangzhou and Dongguan to the north. Zhongshan is in the vicinity of large cities, and its traffic connection is also convenient. The National Development and Reform Commission approved the project of constructing the Shenzhen-Zhongshan Cross-river Channel (SZCC) in December 2015. The starting point of SZCC is at the Guangshen Expressway, and it crosses the Pearl River to the west, ending at the Saddle Island in Zhongshan, with a total length of 24 km. After the completion and opening of the channel, the journey time from Shenzhen to Zhongshan, which is 2 hours now, will reduce to 20-30 minutes. Zhongshan housing prices rose sharply as a result of the double effect from the Hong Kong-Zhuhai-Macao Bridge and SZCC. The housing price in Zhongshan second-hand market was RMB 8,500 per sqm in January this year, surged nearly 40% y-o-y.
Although property prices in Zhongshan have risen substantially, they are still relatively low and attractive to buyers from other cities. Besides, the property market of other third-tier cities such as Foshan and Qingyuan, will also benefit from the development of transportation networks. For example, Guangzhou–Qingyuan Intercity Railway is expected to open by the end of this year. It will take just 20 minutes from Guangzhou to Qingyuan by then, and Qingyuan property prices are expected to rise.
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