An Apartment in China's Silicon Valley Costs 43x a Resident’s Annual Pay

Shenzhen is home to China's highest property prices and lowest home ownership rates — and it's a warning for other cities. The Guangdong city’s traditionally loose hukou policy — which determines where people can settle in China — has attracted up to 500,000 new arrivals each year, a migration key to President Xi Jinping’s goal of making Shenzhen a tech powerhouse to rival the West.

Yet the boom has led to the highest property prices and lowest home ownership rates in China, a warning for the country’s other growing cities. The average two-bedroom unit now sells for about $900,000, in a city with per capita income of just $20,000.

With the cost of an apartment equal to 43.5 times a resident’s average annual salary, Shenzhen’s housing affordability is only a notch better than Hong Kong, the worst among 80 megacities, according to E-House (China) Enterprise Holdings Ltd., a real estate firm. As a result, just a third of Shenzhen residents own their apartments, less than half the rate of China’s other big cities like Shanghai, and lower even than the notoriously unaffordable U.S. tech hubs of San Francisco and Seattle.

While the Chinese government is concerned that the nation’s wealth gap and social inequality could lead to the type of upheaval seen elsewhere, the question is what to do about it. On a broader level, Shenzhen’s lack of affordable housing is emblematic of the income disparity that has jumped in recent years after the opening of the economy spawned billionaires like Ma yet threatens to leave more people behind.

“Ownership is seen as a prerequisite for single men if they want to find a spouse,” said Yukon Huang, a former World Bank country director in Beijing. “Many are able to do so by tapping the resources of their parents, but the less fortunate have to struggle to come up with the down payments,” which can be as high as 35% on first homes.

Historically, Shenzhen made room for its migrant workforce in so-called chengzhongcun, literally “villages in the middle of the city.” Surrounded by modern skyscrapers and straddling eight-lane boulevards, these villages typically feature six- and seven-story walk-ups known as “handshake buildings” — packed so close together that residents can stick an arm out the window to shake hands with a neighbor.

It’s not just migrants from poor provinces struggling with housing costs. Russell Zeng is one of the high-skilled tech workers the city is counting on for growth. The 28-year-old left his native Jiangxi to attend Shantou University in Guangdong, and has been working for a financial technology company for two years. He’s bilingual, loves Shenzhen and his job. Yet he doubts he’ll ever be able to afford his own place, even in a city that filters home buyers to give preference to those with higher education and better jobs. When he’s finally ready to buy a home, it may be in a second-tier city away from Shenzhen, he said.

“You see so many people get awesome jobs in Tencent, Huawei, all kinds of tech companies and they get really, really good salaries and they move up the ladder very soon — so it feels like a land of all kinds of possibilities,” said Zeng, who rents an apartment with four roommates. “The ultimate issue here is property because in China you don’t feel like the city is your home unless you own a house.”

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