China’s education reform triggers sharp drop in apartment prices


SHENZHEN – Pressure from China to equalize educational opportunities has caused an unexpected drop in condominium prices in areas near prestigious schools in Shenzhen and other major cities, as Beijing plans to expand school districts to allow children to attend schools outside previously designated areas.

Shenzhen’s Baihua District, a 20-minute drive from Shenzhen Main Station, is full of high-rise condos near popular schools. Children living in the area can attend the Shenzhen Experimental School, a renowned public institution offering primary, junior and senior secondary education. Many of the school’s students attend prestigious institutions such as Peking University, Tsinghua University, and the University of Hong Kong.

In China’s current school district system, children can only enroll in schools in districts where their parents have hostels. People who want their children to attend a specific school must purchase homes in the school district. Lots of families looking for purchased condos xuequfang, or homes in the school district, to allow their children to enroll in these schools. It has driven up house prices in parts of this education-obsessed country.

Many Baihua condos characterize the situation. Last year, when the central government pumped a huge amount of liquidity into the pandemic-stricken economy, investors crowded into the real estate market, pushing condo prices to mind-boggling levels. In January 2021, a condo sold for over 300,000 yuan ($ 46,800) per square meter.

Now, however, housing prices around prestigious schools have started to fall. “We have seen a 30% drop in prices this year and we may see another drop,” said an employee of a neighborhood real estate broker, who declined to be named. The fall in prices in this well-known school district has not escaped the notice of a large audience. Reports circulated online that apartment prices had fallen by 4-5 million yuan.

A playground in the Baihua district of Shenzhen. (Photo by Iori Kawate)

Beijing’s reform has pricked the real estate bubble in the areas around these popular schools. The slide will make it “insignificant to xuequfang“said Wang Peng, a taxi driver.

The government has cracked down on real estate speculation with increased vigor. Prices began to fall over the summer in response to measures to calm a foamy market, including tighter credit ratings for mortgages.

Housing prices in areas around good schools, which are only set to rise, slowed after the Communist Party’s Politburo pledged to curb speculative transactions at a meeting in April. Now, the latest school district overhaul may have finally dampened the rampant speculation.

The Beijing municipal government also announced in April its intention to relax school district regulations to make schools accessible to children in more areas. Prices for apartments near the famous Zhongguancun No. 3 Primary School, located in the Haidian district of Beijing, fell 10% from March to September.

A row of xuequfang condos in the Haidian district of Beijing. Most of the buildings date from the 1980s and 1990s but are still popular and expensive. (Photo by Iori Kawate)

Another potential blow to the school district’s real estate bubble could come from a new policy that will regularly transfer teachers and principals between schools in Beijing, which is expected to be introduced during the current semester. Traditionally, Chinese school teachers stay put unless they change jobs. Mandatory transfers are designed so that talented teachers and educators flow throughout the school system.

“[Business] has been slow for a while, ”said an employee of a real estate broker in Beijing’s Xicheng District, near Zhongnanhai, which is home to the Communist Party headquarters. “People are waiting to see what kinds of effects the new policy will have in the market.”

The neighborhood is home to many prestigious schools attended by the children of party cadres, hence an abundance of xuequfang condos. But the uncertainty over the new education policy is discouraging investors.

The latest reform should also have a major impact on real estate development. “Launching a condo because of its proximity to a prestigious school no longer works,” says Yan Yuejin, research director at the Shanghai Yiju Real Estate Research Institute. “Real estate developers should consider similar educational policies.”

Many developers are strapped for cash due to the stricter financial regulations adopted by the government. Their situation only worsens as xuequfang, once a safe cash cow, loses its appeal.


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