Beijing's commuter town of Yanjiao feels impact of downfall in property sector

Buying property in the small town of Yanjiao was once the first choice for many white-collar workers who did not have a permit to buy a house in Beijing. Like New Jersey is to New York, Yanjiao is less than two hours to downtown Beijing across the Chaobai river to the west and offers competitive property prices. But many of those dreams have now been dashed with Yanjiao a microcosm of the downfall in China’s property sector, which has far-reaching implications on personal fortunes, economic growth, financial stability and commodity suppliers. After property prices in Yanjiao halved, and some even dropped below the value of the mortgage, some owners chose to suspend their repayments.

But their decisions were not without consequences with one case highlighted on social media last year seeing a 35-year-old sued by the Bank of China (BOC) for refusing to pay the CNY16,800 installment and remaining CNY2.82 million mortgage. It is, however, just the tip of the iceberg as there have been more than 600 similar disputes heard at local courts since 2019, according to verdicts published by China Judgements Online. The court in the city of Sanhe, which is the administration center for Yanjiao, has listed around 1,000 flats for auction since May 2020 on e-commerce platform JD. “It’s an abnormal phenomenon that many investors are trapped in Yanjiao and some assets even turned negative,” said Zhang Dawei, Senior Analyst with property agency Centaline.

According to a central bank survey, property accounted for 59.1% of household wealth in 2019, 28.5 percentage points higher than American families, while it accounted for 75.9% of their total debt. Spurred by rumors that Yanjiao would be absorbed into Beijing, Yanjiao’s population doubled in a decade to 629,554 at the end of 2020. News of possible coordinated planning or underground train connections saw home prices rise eightfold in 10 years to CNY40,000 per square meter in 2017. Prices have now halved partly due to a relaxation of local property regulations, according to Zhang, who does not see prices rising back to the previous highs due to low investor confidence.

In China last year, the value of property sales grew by just 4.8% to CNY18.2 trillion compared to 8.7% growth in 2020. The amount of floor space sold also grew by just 1.9% last year, with real estate investment growth falling to a 22-year low of 4.% last year. Moody’s Analyst Kelly Chen said that the value of national property sales is likely to decline by 5% to 10% in 2022 due to constrained funding and weaker homebuyer confidence, the South China Morning Post reports.