I was in Hong Kong last week. To find out why Hong Kong people flocked to Shenzhen on weekends, I decided to cross the border for a personal experience.
Singapore’s infamous train fault
There is a Chinese saying that “Good things aren’t heard outside the house. Bad things spread a thousand miles. During this trip, whoever I met, the first thing they mentioned was “Singapore’s trains are not working. Don’t go back. Stay for a few more days.”
I do stay in the west. To support the government’s car-lite policy, national climate target and Singapore Green Plan 2030, I have traded in my car for two SimplyGo cards.
Surprisingly, my friends and family in Hong Kong believed that the Singapore government had just struck the jackpot. In the SAR, the MTR Corporation has to pay a heavy fine for any train disruption lasting 31 minutes or more.
In 2019, MTR was slapped with a total of HK$35 million (S$6 million) penalty for two service breakdowns. With last month’s faulty trains in Circle Line, North-South Line and a 6-day downtime for East-West Line, Singapore government could easily pocket tens of millions fines from SMRT. Huat ah!
To show their apology, after service resumed, Hong Kong’s MTR offered 50 percent discount for adult tickets for two weeks. After all, no senior government official need to take public transport. Hence, it is fine. I mean, a fine is fine.
Thankfully, there is no such service performance agreement and penalty practice for MRT trains in Singapore. Otherwise, our government might approve SMRT to increase fares drastically to cover this unpredictable expense. In the end, we will all be fined.
Therefore, despite zero compensation for the 1.3 million affected passengers, we should be grateful that service resumed when PSLE exams were almost over.
China stimulus package triggers stock market rally
Thanks to Fed’s first rate cut on September 18. It weakened the high US dollar against the Chinese yuan. This convinced China that it’s time to strike. Beijing could go ahead with quantitative easing without reservation.
On September 24, the People’s Bank of China announced the reductions of interest rate, mortgage rate and bank reserve requirement ratio. The cuts could lower the mortgage payment burden by RMB150 billion (S$27.5 billion) a year.
To save the country’s flagging economy, equities and property market, President Xi Jinping went “all out”. On the other hand, global investors took it as a sign that the tide has turned and shouted “all in”.
Anyway, stock prices have been low for a few years. Many China and Hong Kong companies are trading below valuation. There is limited room to fall and more upside than downside.
The next few days large institutional and retail investors alike placed big bets on China’s recovery. Capital inflows with hot money from US equities, gold and crypto flowed in the same direction.
On September 30, both Shanghai and Shenzhen stock market achieved record daily turnover. Transaction value reached RMB 2,593 billion (S$475 billion).
SZSE (Shenzhen Stock Exchange) Component Index climbed 10.67 percent, with accumulative rise of 37 percent in September. Likewise, Hong Kong’s Hang Seng Index soared 36.6 percent from a low of 16,647 on August 6 to 22,732 when the market closed today (October 4).
The huge rally seemed irrational. But it was quick money, especially before China’s golden week holiday starting on October 1. The Chinese have good reasons to eat, drink and be merry. Everywhere in Shenzhen, restaurants were crowded with customers. Honestly, the taste and varieties of Chinese food in Shenzhen are better than Hong Kong.
Easing of homebuying restrictions in China’s tier-one cities
Two days later (September 26) at the 24-man politburo meeting, President Xi introduced stimulating measures for the property market. He called for limiting growth in housing supply, increasing loans for whitelisted projects and lowering interest rates on existing mortgages.
This was perfect timing for house hunting for potential homebuyers during the 7-day golden week holiday. Hopefully, it could boost property transactions and report dramatic rise in property sales in October.
Over the weekend, China’s tier-one cities were fast to introduce corresponding easing measures to boost the confidence of homebuyers.
1. Guangzhou
From September 30, Guangzhou removed all home purchase restrictions.
2. Shanghai
From October 1, Shanghai lowered the required tax-paying period from three years to one year for non-residents to buy homes in non-central areas. Downpayments were lowered to 15 percent for first homes and 25 percent for second homes.
3. Beijing
On the same day, Beijing reduced the required tax-paying period from five to three years for non-residents. Downpayments were down to 15 percent for first homes and 20 percent or second homes.
4. Shenzhen
On September 29 past 11 pm, Shenzhen Department of Housing and Construction also published its revised property purchase policies, effective the following day.
– All resident families (except singles) with Shenzhen hukou (户口) can buy a second home in core districts and a third home in non-core districts.
– Non-residents (both families and single adults) can buy one home in all districts with 1-year personal income tax or social insurance certificate. Otherwise, they can buy one home in non-core districts.
– Non-resident families with two or more children are eligible to buy a second home.
– Value-added tax on housing transfer is revised from five to two years.
Shenzhen: More children, more properties
China has a fast-aging population. Since the Chinese like to buy properties, it is a great idea to allow families with two or more children to buy second and third homes. Maybe the Singapore government can consider implementing the same to save our record low fertility rate.
Above all, eligibility to buy second homes is the bait. Learning new skills and enriching life experiences through parenthood are the ultimate goals.
Having children teach us how to master multi-tasking, productivity and time management. It helps us understand the true meaning of patience, compromise, sacrifice and unconditional love – things we can’t learn from SkillsFuture.
What Shenzhen is like
Shenzhen is the Silicon Valley of China, with the most entrepreneurs and innovations in the country. It is the headquarters of Tencent, Huawei, BYD and DJI. In fact, high-tech industries generated over 40 percent of Shenzhen’s US$491 billion GDP last year.
In this prosperous modern city, infrastructure is top-notch. There is hardly any place with no digital payment.
One stretch of shops at the basement of KK Mall already has three China local EV brand showrooms. Electric car models are bigger, nicer, more powerful and very affordable. Tesla should definitely set up a department that does nothing but advocates every government to set up EV tariffs against China.
However, there are more expats and foreigners in Shanghai and Beijing compared with Shenzhen because of differences in lifestyle.
For one, I don’t think I will ever get used to motorcycles and bicycles having their right of way over pedestrians on the streets and in the metro underground walkways. In Shenzhen, you don’t need petrol in a car or a bike, you just need a horn that works. With all the cars, motorcycles and bicycles horning from all directions at the same time, I need to have my headset on.
What a luxury project is like in Shenzhen
Back in the 1980s, some from Hong Kong chose to retire in Shenzhen when the city across the border was still affordable. From day one, Hong Kong people can buy homes in China like other non-residents.
During the peak of the property market a few years ago, cash-rich Chinese bought homes in Hong Kong. Now prices have plummeted 27 percent. In return, Hong Kong people also bought homes in China. Now prices have plunged over 30 percent.
While in Shenzhen, I was attracted by property advertisements on the window of property agency shops. From far the agents could tell I am from Hong Kong. And I had never found myself so popular being married with two children. They immediately added me to WeChat and sent me property project details. We could conduct viewings later in the day if I am free.
One newly completed luxury project caught my eyes.
1. Location
The development is less than 300-metre to Laojie (老街) metro station – two stops from Lo Wu (罗湖) station which is the same place as Hong Kong’s own Lo Wu station. It is located in Dongmen (东门) which is similar to Singapore’s Orchard with many malls, eateries and street shops. Furthermore, it is 10 minutes’ walk to The Mixc (万象城), the equivalent of ION Orchard in Shenzhen.
2. Price
The project was designed by an Italian architect and two separate interior designers from Hong Kong and Taiwan. The agent claimed that prices have fallen 50 percent from the peak. Selling prices start from RMB45,000 m2 (S$765 psf). High floor units could fetch up to RMB60,000 m2. However, if my budget is RMB30,000 m2, I can go for second-hand projects in the same location.
3. Facilities
Whatever facilities in Singapore condos are by default found in their counterparts in Shenzhen. In addition, this luxury project also offers personal housekeeping services, including home organizing and tidying, banquet and event planning, morning and evening walk the dog service, pet fostering, club and michelin-star restaurant booking, breakfast/flowers/gifts ordering, etc.
I could imagine living here like a king: Waking up in the morning with breakfast delivered to me. Someone walks my dog twice a day. Booking is done for my anniversary dinner at a michellin-star restaurant. They send flowers and gifts to my loved ones. For next week’s family vacation, they will take good care of my pets. When I come back, I expect whole-house cleaning, tidying and re-organizing all done.
Singapore’s luxury condos offer none of the above services. I can’t help but wondering what Singapore’s S$500 monthly maintenance fees are for.
Bull run or short rally?
Meanwhile, some developers in Shenzhen have reported withdrawing discounts or raising prices for new projects after the announcement of homebuying easing measures.
Nonetheless, it would be interesting to see whether Beijing’s latest new fiscal and homebuying measures could save China’s economy and real estate market. The million-dollar question is whether this is the start of a bull run or just a short-term rally.
In Singapore, I still recall in the early to mid-2000s, home prices fell deeper after the government relaxed borrowing restrictions and introduced stimulating measures. The logic is: If the government is so desperate, the market must be really bad. In case it is a dead cat bounce, let’s wait and see for the time being.
Food for thought
The reason for writing this blog post is more for knowledge sharing. There is no intention to promote buying homes in China.
On the contrary, I don’t advise Singaporeans to buy properties in China. It is not their mastering of the Chinese language and culture, but more the lack of understanding of the country’s laws and practices. It is irrelevant to read China from a western point of view. Above all, it is very dangerous to invest in a country when one doesn’t understand how the central or local governments and companies work there.
“Why could an overseas property you bought turn into an investment blunder and a big headache for you? Because you assume that the market, return, ownership and quality of buying real estate overseas are the same as buying properties in your home country.
In many overseas markets, property data are rough estimates, often supplied by local industry stakeholders, with the facts skewed to their advantage. To invest in an overseas property without due diligence is to buy a cat in a sack. When the market lets the cat out of the bag, naïve buyers are left to face the consequences.”
(Read my earlier blog posts “What did deflation of China’s property bubble tell us” and “Who is to blame for China’s property crisis?”)
My book Behind The Scenes of The Property Market is available for preview and order online.
Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.
If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.
You can watch the recording of the presentations at the 2023 Mid-Year Singapore Property Review and Outlook seminar.
The video 2023 Singapore Private Home Market is available for viewing here.
The post was very good, I appreciate how you explain it, Keep the posts coming! Very good talent.
Thank you for reading my post. It is my pleasure to share my two cents worth in my blog.
Great article! Thank you for your effort in writing and sharing it.
Thank you! Glad you like the post 🙏