China education reform triggers abrupt fall in condo prices

Expanding school districts lessen value of homes close to choice institutions.

China’s push to equalize educational opportunities has unexpectedly caused condominium prices to plunge in areas near prestigious schools in Shenzhen and other major cities, as Beijing plans to expand school districts to allow children to attend schools outside of previously designated zones.

Shenzhen’s Baihua district, a 20-minute drive from the main Shenzhen train station, is filled with high-rise condos close to popular schools. Children living in the district can attend Shenzhen Experimental School, a renowned public institution offering primary, junior and senior high school classes. Many students at the school go on to prestigious institutions such as Peking University, Tsinghua University and the University of Hong Kong.

Under China’s current school district system, children can only enroll in schools in the districts where their parents have homes. People who want their children to attend a specific school must buy houses within the school district. Many families looking for condos bought xuequfang, or school district homes, to allow their children to enroll in these schools. This has caused housing prices to soar in certain districts in this education-obsessed country.

Many of the Baihua condos typify the situation. Last year, when the central government injected a huge amount of liquidity into the pandemic-hit economy, investors piled into the real estate market, pushing condo prices to nosebleed levels. In January 2021, one condo sold for over 300,000 yuan ($46,800) per sq. meter.

Now, however, housing prices around prestigious schools have begun to tank. “We’ve seen a 30% fall in prices this year and may see a further decline,” says an employee at a real estate broker in the district, who declined to be named. The collapsing prices in this well-known school district have not escaped widespread notice. Reports have been circulating online that condo prices have plunged 4 million to 5 million yuan.

A playground in Shenzhen’s Baihua district. (Photo by Iori Kawate)


Beijing’s reform has pricked the housing bubble in areas around these prized schools. The slide will make it “meaningless for xuequfang,” says Wang Peng, a taxi driver.

The government has been cracking down on real estate speculation with increased vigor. Prices started sinking over the summer in response to measures to calm a frothy market, including stricter credit scores for mortgages.

Housing prices in areas around good schools, which were believed to go only higher, slowed after the Communist Party’s Politburo pledged to curb speculative transactions in an April meeting. Now, the latest school district overhaul may have finally curbed rampant speculation.

The municipal government of Beijing also announced in April plans to ease school district regulations to make schools accessible to children in more areas. Prices of condos near the famous Zhongguancun No. 3 Primary School, located in Beijing’s Haidian district, fell 10% from March to September.

A row of xuequfang condos in Beijing’s Haidian district. Many of the buildings date back to the 1980’s and 1990’s but are still popular and pricey. (Photo by Iori Kawate)


Another potential blow to the school-district housing bubble could come from a new policy that will regularly transfer teachers and principals among schools in Beijing, which is expected to be introduced during the current semester. Traditionally, teachers at Chinese schools stay put unless they switch jobs. The mandated transfers are designed to see that talented teachers and educators circulate throughout the school system.

“[Business] has been sluggish for a while,” said an employee at a real estate broker in Beijing’s Xicheng district, close to Zhongnanhai, home to the headquarters of the Communist Party. “People are waiting to see what kind of effects the new policy will have on the market.”

The district is home to many prestigious schools attended by children of party executives, hence an abundance of xuequfang condos. But uncertainty about the new education policy is discouraging investors.

The latest reform is likely to have a major impact on real estate development as well. “Pitching a condo due to its proximity to a prestigious school no longer works,” says Yan Yuejin, research director at Shanghai Yiju Real Estate Research Institute. “Real estate developers need to study similar education policies.”

Many developers are strapped for cash due to the tighter financial regulations adopted by the government. Their plight is only getting worse as xuequfang, once a sure cash cow, is losing its appeal.


You might also like