By Liangping Gao&nbsp;and&nbsp;Marius Zaharia
BEIJING/HONG KONG (Reuters) - Beijing resident Hu Yongwei bought more than a dozen&nbsp;apartments&nbsp;in the small central&nbsp;Chinese&nbsp;city of Hebi for about $31,000 in all, betting they will be financially more rewarding than other investments.
Hu, who mostly acquired two- or three-bedroom&nbsp;apartments&nbsp;built about three decades ago, spent 18,000 yuan ($2,528) this month in purchasing his 15th property in Hebi, where prices have plunged over the last two years.
"The flats were sold very&nbsp;cheaply, like cabbage," the 39-year-old said, adding his family's bad experience with the stock market has made him steer clear of shares.
Real estate agents said low-cost&nbsp;apartments&nbsp;in smaller&nbsp;Chinese&nbsp;cities&nbsp;such as Huainan&nbsp;and&nbsp;Rushan in the east,&nbsp;and&nbsp;Gejiu in the southwest, are also being bought, largely by people living outside those locations.
The deals demonstrate that&nbsp;buyers&nbsp;are starting to turn their attention towards smaller&nbsp;cities&nbsp;in China where property prices are&nbsp;some&nbsp;of the&nbsp;cheapest in the country after years-long declines amid a wider sector downturn&nbsp;and&nbsp;a sluggish overall economy.
While the small-city purchases are not significant enough to impact China's giant real estate market,&nbsp;and&nbsp;data on transaction volumes is not available, they nevertheless indicate that a tiny corner of the crisis-hit sector is exhibiting signs of life.
The deals come at a time the picture for China's property market is getting darker. New home prices rose at a slower pace in May&nbsp;and&nbsp;property investment fell at its fastest in more than two decades, data showed.
For&nbsp;buyers&nbsp;with the means to get back into the market, the rock-bottom prices of second-hand&nbsp;apartments&nbsp;in the smaller&nbsp;cities&nbsp;have been hard to resist.
Hu paid a surprisingly low 1,000 yuan excluding taxes&nbsp;and&nbsp;fees for one of his&nbsp;apartments&nbsp;in Hebi. According to data from Anjuke, one of China's largest real estate platforms, prices are 27% off their 2021 peak in&nbsp;some&nbsp;areas in the city.
Similarly, prices are as much as 24% below their top in parts of Huainan, Rushan&nbsp;and&nbsp;Gejiu.
By comparison, prices in top-tier Beijing, where an average second-hand&nbsp;home can cost tens of thousands of yuan, fell just 1.5% over a six-year period to May this year, while in tier-2 city Chongqing, they fell a little more than 10% over five years, according to Reuters calculations based on Anjuke's data.
'BUYERS&nbsp;ARE NOT LOCALS'
Real estate agents said&nbsp;buyers&nbsp;in the small&nbsp;cities&nbsp;are mostly from out of town. They range from speculators who have no intention of living in the&nbsp;apartments, to youth seeking a&nbsp;cheap&nbsp;place to "lie flat", a&nbsp;Chinese&nbsp;term for doing just enough to get by, to people looking for affordable retirement.
In Huainan, "most of the&nbsp;buyers&nbsp;are not locals", said Zhao, an agent who only gave his surname because he was not authorised to speak to media. "Due to high living costs in big&nbsp;cities, young people come here to buy&nbsp;cheap&nbsp;houses&nbsp;and&nbsp;lie flat."
In Rushan, agent Liu Yong said most&nbsp;buyers&nbsp;are from elsewhere in China, aged 40-to-50&nbsp;and&nbsp;looking to set up their retirement by the sea. An agent in Gejiu said&nbsp;buyers&nbsp;aim to move there because the cost of living is lower.
Analysts, though, are reluctant to&nbsp;draw&nbsp;bullish conclusions from the home purchases in these small&nbsp;cities&nbsp;given broader indications the world's second-biggest economy is struggling to pick up from COVID-19 lockdowns.
Consumer sentiment remains below the range set over the past two decades. Domestic demand&nbsp;is weak as consumers&nbsp;and&nbsp;companies prefer paying down debt to investing.&nbsp;And&nbsp;youth unemployment is at a record high of above 20%.
"The fact that there are so many people buying low-cost flats in smaller&nbsp;cities&nbsp;reflects&nbsp;caution," said Hwabao Trust economist Nie Wen. "People are not confident about their future income."
($1 = 7.1643&nbsp;Chinese&nbsp;yuan renminbi)
&nbsp;
(Editing by Muralikumar Anantharaman)

you might like

Cheap 'like cabbage' apartments in some Chinese cities draw buyers, and caution