DPRK talks drive up Dandong home costs

Soaring home prices in Dandong, a city bordering the Democratic People's Republic of Korea in Liaoning province, is an irrational market reaction based on hopes that a continuing series of talks will lead to increased commerce, according to an expert in border studies.

Housing prices in Xincheng district, a new housing area on the outskirts of Dandong, jumped 57 percent overnight, according to a report in Securities Times. Dandong is right across the Yalu River from Sinuiju, DPRK.

"Hotel rooms are experiencing high demand and prices have gone up, though it is hard to say whether it's related to visiting property hunters or seasonal travel," said Yuan Xiaoyu, marketing manager at Friend Plaza Hotel in Dandong. "But housing prices in Xincheng district have indeed increased. We locals all feel it is an unusual phenomenon."

But Lyu Chao, a researcher of border studies at the Liaoning Academy of Social Sciences, called the price boom an irrational investment behavior based on overoptimistic assumptions.

"Housing prices in Dandong have always been a reflection of the China-DPRK relationship," Lyu said. "People's confidence in future trade is growing. It is certain to say the trading relationship will become better, but it is still at the beginning stage, and it is too early to say the economy of Dandong will soar in the short term."

The hopes appear based on such developments as DPRK leader Kim Jong-un's recent meeting with Republic of Korea President Moon Jae-in, State Councilor and Foreign Minister Wang Yi's trip to the DPRK, and Kim's plans for a meeting with US President Donald Trump.

Still, Lyu said he does not expect the current housing price boom to last long.

"Dandong is China's largest border and trading city with DPRK, with over 70 percent to 80 percent of that trade volume going through Dandong," Lyu said. "Diplomatic relations with the DPRK directly affect the local economy."

But, he said, Dandong has previously seen similar short-lived property price jumps.

"When the New Yalu River Bridge was built, housing prices in Xincheng district soared. But the bridge has not yet been put into operation, and prices dropped back again," Lyu said. Construction on the bridge started in 2011, but while it is mostly complete, it sits unused.

Liang Qidong, assistant dean of Liaoning Academy of Social Sciences, said prices in Xincheng district have been low.

"The real estate market in Dandong has not performed well in recent years, especially in Xincheng district, which is too far from the center of town, making locals not so interested in it. Now the DPRK has shown optimistic signals and the local developer started to seize the opportunity," Liang said.

"Also, the local government should be concerned about the irrational price increase and take action if necessary. After a short market spurt, I think people will take a rational attitude toward the future relations between the two countries and its effect on Dandong's property market."

Yang Hongxu, deputy director of E-House China, a real estate services provider, also warned that people need to be cautious about buying houses in Dandong.