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Within Hours, Plans for a Quiet Corner of China Send Home Prices Soaring

The New Tork Times The New Tork Times

By AILIN TANG

SHANGHAI — A residential and industrial area roughly 80 miles south of Beijing once barely registered on China’s economic map. Consisting mostly of apartment buildings, villages, wetlands and empty fields, it has primarily been known for its donkey burgers.

But now the area around Xiongxian County has become another example of the frothiness and unpredictability of the Chinese property market — a market that many experts warn could have severe repercussions for China and the world if it stumbles.

On Saturday, China declared that an area that sprawls across three local counties will someday become Xiongan New Area, a gleaming economic powerhouse reminiscent of earlier developments that helped put China’s economy on its fast-growth trajectory. When completed, it will cover nearly 800 square miles, offer favorable regulation to businesses and become a modern urban area crucial to redeveloping the Rust Belt around Beijing.

Almost immediately, speculators pounced, setting off a property buying frenzy and sending shares of construction companies soaring. It has been such a chaotic market that local authorities have been forced to freeze purchases and close real estate offices. Chinese social media showed photos of new property developments and real estate offices with signs saying they had been temporarily closed.

The price spikes have been fast and furious.

In the town of Baigou, about 12 miles north of Xiongxian, prices for an apartment jumped to 12,000 renminbi per square meter — or more than $160 per square foot — from 8,750 renminbi within hours after the announcement, according to Wen Yunlong, a local real estate agent. On Sunday, it rose by an additional 3,000 renminbi, he said.

“Prices have gone up every day,” Mr. Wen said.

Since Saturday, he said, potential buyers had lined up at his agency. “I have been working from 8 a.m. to 10 p.m. these days,” he said. “Last night, I worked till midnight.”

He added: “I haven’t seen so many people here before. It went crazy.”

On Monday, Hong Kong-traded shares of the BBMG Corporation, a Beijing cement maker, jumped nearly 35 percent. Shares of other Hong Kong-traded property-related firms active in the area rose by smaller amounts. Markets in China were closed on Monday for a holiday.

Property is a major investment vehicle in China, where the stock market has long been seen as unreliable and where the authorities tightly limit how much money can be sent outside the country. That has led to surging prices — and worries about bubbles — in a number of cities. While mortgages in China are not as big or as common as they are in the United States, a surge of lending to home buyers has prompted worries about what might happen if China’s property market bursts.

In declaring its intent to build Xiongan, the Chinese government invited comparisons to the southern city of Shenzhen and the Pudong area of Shanghai. Shenzhen was part of China’s earliest experiments with private enterprise after the death of Mao Zedong, and it remains one of the richest parts of China. Pudong, home of many of the gleaming skyscrapers that define Shanghai’s skyline, became one of China’s most successful and high-profile development projects.

Xiongan will become “a demonstration area for innovative development,” Xi Jinping, China’s president, told the official state media.

Xiongan also fits into China’s grand plan to create a vast urban area uniting the capital city of Beijing with the nearby port city of Tianjin and with Hebei Province, the industrial province between them. Called Jing-Jin-Ji, the area — which would include Xiongan — will become a hive of economic activity that is intended to replace Hebei’s dependence on smokestack industries like steel and put the region on a path to rival Shanghai and Shenzhen.

Right now, the Xiongan area has less than 1 percent of the economic output of Beijing, according to state media. It is part of an area known for its donkey burgers — sandwiches with roasted donkey meat, which tastes something like pastrami.

Owen Li took the morning train on Monday from Beijing to sample donkey burgers but had an unusually hard time buying a ticket. Once in Baigou, where property sales had not been shut down, Mr. Li noticed that many cars on the street were brands like Audi, BMW and Mercedes-Benz.

He then met many potential apartment buyers from out of town and began talking to them. Mr. Li said he was tempted to join them, though he wondered at Xiongan’s long-term prospects.

“If I had the extra money, I would buy several,” he said. “It’s cheap and has room for appreciation. But maybe not this time.”