As China's control policies on real estate are being carried out gradually, major developers are turning to the country's second and third tier cities. Second tier city Taiyuan in North China's Shanxi province welcomed many large developers recently.
In July, three parcels of lands in Taiyuan city were sold at a total of nearly 1.7 billion yuan. Industry insiders say land supply in such second tier cities is abundant, while prices aren't very high, which are the main attractions for real estate developers.
Thee cities are under fast development, while local governments' new planning promises many opportunities for businesses.
Yuan Lunhua, Director of Real Estate Association of Shanxi Province said "First of all, local development needs this investment, and investing in Shanxi is not very expensive. Secondly, the purchasing power of local residents is huge, both ordinary people and wealthy need better accommodation. I think this is the main reason for investors to turn to second tier cities."
As housing prices in major cities fell in June, the prices in Taiyuan increased by 4.5 percent year on year, and 0.3 percent month on month.
Wu Yining, Taiyuan Mingdu Real Estate Co., Ltd. said "We started selling in late June, and we sold 550 units within one month."
Local governments agree investors are bringing better quality housing to these second tier cities. But they are concerned that housing prices will be pushed up.