China’s tier 2 cities are where it’s at. Cities like Chongqing, Nanjing and Wuhan are growing faster then Beijing and Shanghai, while their residents are more optimistic about their income and more likely to buy big ticket items.
And now China is the world’s top market for construction. So for property investors – tier 2 is the place to be, right? No, says Credit Suisse, it’s a value trap.
The logic is pretty straight-forward. Residential construction in tier 2 cities is leading to an oversupply of stock and frothy land prices – both of which put downward pressure on developers margins. And that’s before tightening measures and property speculation curbs – currently being trialled in various cities – get rolled out across the board.
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