HONG KONG • Investors are rushing into a sleepy city on the southern coast of China, thanks to a government policy that has seen tens of billions of dollars earmarked to produce a regional economy that would rival the biggest in the world.
China this year kicked off the development of the Greater Bay Area, made up of 11 cities in southern Guangdong province, plus Hong Kong and Macau located in the Pearl River Delta.
Real estate consultancy Colliers International estimates the region already has the fifth-biggest economy in Asia but, under the development plan, it would have the fifth-biggest economy in the world by 2030, underlining why HSBC Holdings sees the region as one of its major markets globally.
The area includes cities such as Shenzhen and Dongguan, which are established tech and manufacturing centres, but the plan is having a dramatic impact on smaller cities in the region that had largely been ignored by developers until now.
One such city is Huizhou, which has some of the lowest home prices in the Greater Bay Area and is benefiting from a plan that aims to mimic the likes of Los Angeles, New York or Tokyo in tying together a vast economic region via major roads and high-speed trains.
Dramatic changes in the city of about 4.8 million people highlight the impact of national policies in China that target specific areas for development.
Huizhou's economic growth accelerated to 7.5 per cent in the first six months of this year, higher than the national average of 6.9 per cent, while property investment shot up 23 per cent, almost three times the rate of the 8.5 per cent national average.
The local government earmarked the equivalent of US$39 billion (S$52.9 billion) for infrastructure investment between 2016 and 2020.
It aims to build 11 high-speed railway stations - the most of any city in the Greater Bay Area - along with many highways. The goal is to enable travellers to reach top-tier neighbours Shenzhen and Guangzhou within half an hour.
"In China, if you want to invest, you go where the national policies go," said property agent Zhang Guangzi in Daya Bay, an emerging district in Huizhou.
Two years ago, HSBC brought attention to the Greater Bay Area when it announced plans to beef up its presence in the region. The global bank said it would quadruple its staff and increase lending to mid-sized companies in the infrastructure and property sectors.
Last month, Chinese developers including Logan Property, Agile Group and Yuzhou Properties said at earnings conferences that they planned to expand in Huizhou and elsewhere in the Greater Bay Area.
Property giants Country Garden and China Evergrande already own large land banks in Huizhou.
And thanks to spillover demand from Shenzhen - where around 60 per cent of buyers are from - Huizhou's supply of new homes is tight. Based on the rate of sales, the city's housing inventory dropped to six months of supply last year from 30 months in 2015.
Much of the demand for new homes in Huizhou comes from people working in Shenzhen. Many owners live in a dormitory provided by an employer in Shenzhen while housing their families in Huizhou.
Huizhou's average home prices are around 10,000 yuan (S$2,054) per sq m, a quarter of other areas near Shenzhen and just a tenth of the cost in central Shenzhen.
Facing competition from other areas in the Greater Bay Area, Huizhou has avoided placing restrictions on home purchases, prevalent in many other cities in China where prices have been rising rapidly. More than 80 per cent of buyers are from outside the city, agents and developers said.
Instead, it has implemented a price ceiling on the sale of new homes since late last year.
If it was not for the ceiling, prices would increase, said Country Garden's Huizhou district marketing general manager Huang Min.
"Prices are suppressed. There's a large room for prices to grow."