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China Moves to Dampen Speculation in School District Residential Properties

By Gao Feng 2021-07-12 -- Authorities in more than 10 Chinese cities and provinces have brought in new measures to cool residential property prices since last year.

School admissions in China are made on the basis of the residential address of the family applying for the school place, sending prices of apartments near high-performing schools skyrocketing in some areas, official media reported.

Since last year, authorities in Zhejiang, Sichuan, Nanjing, Shanghai, Beijing, and Chongqing have all announced measures to curb rising residential prices in school districts.

Some areas have sought to dilute the impact on home prices by awarding school enrollment rights to families who rent apartments in school districts, not just to those who buy.

Some districts in China have sought to slash applications by raising the bar for parents, requiring families to have owned property in the district for several years prior to the application.

Prices near Beijing's fifth-ranking Zhongguancun No. 3 Primary School jumped by around 31 percent in the space of a single year, while apartments in Yuetan district near another top school come with a markup of nearly 60 percent compared with comparable properties elsewhere, Bloomberg cited online property data as showing.

Prices for housing in the most popular school districts in Shanghai rose by an average of 20 percent in the space of one year, it cited Urgan Surveyors as saying.

CCP general secretary Xi Jinping's comments in March to the effect that property prices in school districts are fueling educational inequality appear to have spurred momentum to address the issue at local level.

China's Politburo announced on April 30 it would move to dampen speculation in properties in school districts, the first time the issue has been discussed at such a high level of government.

Authorities in Beijing's Xicheng district, home to a number of popular schools, have announced they will be delinking property locations from specific schools, with families only entitled to register at one school in any given district, without specifying which one.

Some parents in the district have been informed that they won't be able to register at their preferred school, and will instead be allocated a different school in the same area, the Chinese Business Network reported.

Prices of 60-square-meter homes have fallen from 10 million yuan to 9.2 million in the past few days following the news, it said.

Wang Yeqiang, director of the Institute for Urban and Environmental Stuties at the Chinese Academy for Social Sciences in Beijing, said the measures are likely to be highly effective.

"Every wave of residential price increases starts with increases in school district housing," Wang told RFA. "It acts as a bellwether of market-wide price increases."

"[These policies] will have to stabilize school district housing speculation and rein in investor demand," Wang said.

Political scapegoat

Independent scholar Si Ling said the real estate market is something of a political scapegoat in China.

"There is a lack of clear and transparent policy explanations regarding the various allocation policies linked to housing in school districts," Si told RFA.

"Many commercial organizations are currently speculating about the government's intentions regarding school district boundaries, and what the next government's policy direction will be," he said.

He said the policy was sending a strong signal to the real estate sector to rein in hot money.

"[It's saying that they] must be more cautious in this area of their business, as there may be restrictions on venture capital inflows, and even maybe foreign capital inflows," Si said.

But he said the policies don't address the root cause of the issue.

"The root cause of this phenomenon around school district housing is that there is a huge divide between urban and rural China, with the most advanced medical technology and educational resources concentrated in the cities," Si Ling said.

"It is only in recent years that the Chinese government has realized that this problem is having an impact on social stability," he said.

The Politburo recently also considered a slew of measures aimed at encouraging people to have up to three children, including housing incentives.

Among the support measures planned by the government to tackling a low fertility rate and an aging population include improvements to prenatal and postnatal care, a universal childcare service, and reduced education costs for families.

China's fertility rate stood at around 1.3 children per woman in 2020, compared with the 2.1 children per woman needed for the population to replace itself.

But raising children in China is a costly business, with parents stretched to find money for even one child's education.

While state-run schools don't charge tuition until the 10th year of compulsory education, they increasingly demand nominal payments of various kinds, as well as payments for food and extracurricular activities.

Translated and edited by Luisetta Mudie.

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