23 October 2018
Education-related demand has been a key factor behind the recent surge in home prices in Beijing. Photo: China Daily
Education-related demand has been a key factor behind the recent surge in home prices in Beijing. Photo: China Daily

Will new school zoning rules help cool Beijing property?

China’s capital city saw its housing market get heated up further after the Chinese New Year holiday. The average price of secondary flats surged to over 120,000 yuan per square meter, gaining more than 30 percent within just a month or so.

The rise in Beijing home prices has far exceeded that of Shanghai and Shenzhen. The frenetic gains are now having a spillover effect on some other places in the country.

Undoubtedly, education-related demand is the biggest driver behind the latest price surge.

There are several school districts across Beijing. Most children in the capital are assigned to a school within their neighborhood.

That means if parents can buy a property in a school district that has two to three elite schools, their children have fairly high chances to get into these best schools, which will in turn boost the pupils’ prospects of gaining admission into top local universities later.

In the past, parents resorted to some tricks to help their kids secure a place in elite schools, like bribing government officials and getting some sort of consent letter.

The letters could cost as much as 200,000 to 300,000 yuan for top elite schools, and 80,000 to 100,000 yuan in the case of second-tier institutions.

But now, following President Xi Jinping’s crackdown on corruption, not many people are willing to take the risk of shady tactics.

This has made apartments in the sought-after school districts even more popular with parents, who generally believe investing in a house in elite school zones is the best thing they can do for their children.

The rush has led to prices in some areas shoot up to crazy levels. According to reports, there had been a case when an unfurnished flat measuring just around 100 square feet had a price tag of over 3 million yuan.

Now, amid this situation, Beijing made a sudden announcement last Sunday that it will redefine the existing school districts. The government will also introduce a lottery to allocate some primary school places.

Mini-flats like the one mentioned above will no longer be an acceptable address when children apply for schools.

The new policy was put into effect immediately, with no grace period.

This brings up the question: will the fresh regulation be able to cool the property speculation in Beijing?

We can only wait and watch. 

This article appeared in the Hong Kong Economic Journal on March 29

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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