HOW LOW CAN YOU GO

Housing is so scarce in China’s Silicon Valley that even illegal “pigeon cage” apartments are going fast

Obsession
Shenzhen
Obsession
Shenzhen

Shenzhen is more than just the manufacturing hub for hardware products in China—it’s also the country’s hottest real estate market (link in Chinese). And housing prices are getting so high that the city is exhibiting the ultimate symptom of a bubble property market—outrageously expensive “micro-apartments” that aren’t even up to code.

This week, social media users in China were in uproar over Shenzhen property ranging in size from 5.7 to 7.5 square meters (62 to 80 square feet) that they called “pigeon cage” apartments. According to financial magazine Caijing (link in Chinese), brokers listed each apartment’s starting price at 880,000 yuan ($131,957), around 20 times the city’s individual annual income of 40,948 yuan ($6,136) (pdf, p. 387, link in Chinese).

One 6-sq-m (64.5-sq-ft) apartment was fitted with a desk, a 1.5-m-long (4.5-ft) bed that folds into the wall, and dozens of cabinets and sideboards, according to photos circulating on Chinese social media.

The folding bed that could also turns into multifunctional desk.

A working desk and other utilities.

Much as tech companies like Google and Uber are causing housing prices to shoot up in Silicon Valley, the presence of Chinese tech giants like Huawei and Tencent in Shenzhen has caused young professionals to flock to the city. It now has China’s highest property prices (link in Chinese).

Average home prices in Shenzhen are more expensive than San Jose, which serves Silicon Valley, with a price-to-income ratio of 70, London-based research company Longview Economics reports.

A typical home, estimated to be around 60 to 90 sq m (645 to 967 sq ft), is sold at 3.5 million yuan to 5.2 million yuan ($783,000), according to Wang Fei, marketing manager from broker Centaline Property’s Shenzhen branch. That same price buys you a 1,500-sq-ft home in San Jose, with an average price of $515, according to data on an online real estate database company Zillow.

Commercial and residential real estate in Shenzhen is much more expensive than the national averages.

“More and more apartments of smaller size (from 30 to 40 sq m) popped up in recent years,” said Wang. “They occupy around 10% of the city’s second-hand market, especially in the city’s popular housing districts like Nanshan.” She added that “most buyers were looking for investments.”

Besides their tiny size, these apartments may be technically illegal.

Broker advertisements for the properties state the apartments are about 6 sq m, as do as the properties’ official Land Use Rights permits (LUR, the legal certification for property in China). But in reality, the sections devoted to the kitchen and bathroom alone takes up nearly that amount of space—the full apartment may actually measure about 12 sq m.

The developer describes the unauthorized sections as “gifts” to the buyer (link in Chinese). But this means the unit’s owner will not be protected by law for that section of the apartment, as per China’s LUR policy (link in Chinese). In other words, they’re occupying illegal space alongside legally purchased space.

Meanwhile, China’s 2012 residential design code (link in Chinese) also specifies that apartments under 20 sq m (215 sq ft) cannot receive LUR permits, meaning the properties might be entirely illegal anyway. A sales agent said (link in Chinese) the apartments obtained LUR permits before 2012.

Shenzhen authorities ordered developers (link in Chinese, registration required) to cancel the contracts on the sold apartments on Sept. 26, arguing that the “gift” sections were taking up the building’s public space. But buyers who lost out on the illegal micro-apartment of their dreams will have many more options to choose from.

An earlier version of this article miscalculated the difference between the apartment listing price and average income.

home our picks popular latest obsessions search