China's Largest "Ghost Town" is Thriving

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Housing prices in the Kangbashi District soared after the move of the flight school.

Kangbashi is a city in the middle of the barren deserts of Inner Mongolia, in the Ordos City District. Once it turned out to be virtually abandoned and earned the reputation of "guicheng" (ghost town): a number of empty new buildings were not in demand. But recently, the settlement has begun to come back to life: all empty apartments have already been sold out, and local developers are building new complexes, as Nikkei Asia reports. By the end of the year, it is planned to start construction of 10 residential buildings.

The secret of the city's dramatic changes lies in the fierce competition between high school students and their parents for the right to enroll in the best universities in China. After the municipal authorities moved some of the best schools in the district to Kangbashi, parents with new students, as well as teachers, began to move to the city en masse and buy housing. For example, the city is now home to Ordos No. 1 High School, which sends students to leading universities in Beijing.

Work on a new urban center in Kangbashi gained momentum in 2009, when the central government invested $610 billion in the country's economy. This happened after the global financial crisis led to a sharp increase in coal prices and fueled interest in Ordos. When the bubble burst, the apartments, which at their peak cost more than $ 1,200 per sq.m, fell to $460-770.

However, according to local realtors, prices in the center of Kangbashi now reach $2,300 per sq.m. Even though the city's economy shrank in 2019 and 2020.

Also read: China Warns About a Bubble in Property Market

Strict rules in place in school districts require that parents who want to send their children to a desired school own a home in the district. This raises prices to levels of widespread concern. Real estate near good schools in Beijing or Shanghai can be worth millions of dollars.

The flood of domestic investment in housing, which contributed to China's record 18.3% GDP growth last quarter, has led some observers to warn of a potential glut in the market. Shenzhen has even imposed new restrictions on property purchases in an attempt to tame prices.

According to Haitong Securities, more than 30% of the economic growth from last spring to the end of 2020 can be attributed to real estate investment, which exceeds the average contribution of the industry over the past decade. Many local governments could not make ends meet without income from the sale of public land to compensate for the lack of a housing and property tax. To increase the budget, China rents out hundreds of uninhabited islands.

The development that helped China recover from the coronavirus outbreak has led to a cluster of vacant properties in lower-tier cities. According to the Chinese research institute E-House, at the end of last year, the inventory of new condominiums reached the highest in four and a half years.

In addition, population growth has stopped. The number of people aged 20 to 30 (the main home buyers) is declining. In particular, in Ordos, the population grew at an average rate of almost 5% per year in the six years to 2012, but the rate fell to an average of 0.6%.

School steps have a striking impact, but it's temporary. In terms of economic growth, Inner Mongolia is still at the bottom of China's 31 provinces and provincial cities.

"We still have a fear that if the new development picks up, we will create a new ghost town," said a developer in Ordos.

Quoting conditions of Prian.info materials

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