Politicians and academics have begun discussing conceptual plans for integrating Hong Kong and Shenzhen, the cross-border boomtown whose population has soared to top that of the former British colony.

While the border will remain for another 40 years, real estate prices in Shenzhen have already achieved a degree of symmetry with those of its richer neighbour.

Indeed, in June, Shenzhen property prices rose higher than those of any other Chinese city. JPMorgan ranked it as the month’s “hottest market” as real estate changed hands at an average price of Rmb14,500 ($1,900) to Rmb15,500 a square metre, up roughly 70 per cent from the Rmb9,000-Rmb9,500 full-year market average during 2006.

While investors enjoyed the buoyant market, grumbling arose among residents looking for new homes. A municipal official told the Southern Weekend newspaper that property prices “had already become the city’s biggest political issue”.

With similar sentiments spreading round the country, Beijing reacted with a number of measures to cool the property market.

Shenzhen and other local governments took further steps to try to slow rising prices.

Shenzhen moved to limit Hong Kong residents to owning one property in the city. Nationally, regulators leaned on banks to reduce mortgage lending and pledged to crack down on those evading capital gains taxes on property.

Proposals were floated to restrict developers from selling apartments ahead of construction.

The measures had a palpable effect in Shenzhen. Transactions through some property agencies declined by 50 per cent in July, according to local media reports. Most reported a fall in prices of about 8 per cent.

These developments haven’t ended the push for stronger cooling measures. The State Administration of Foreign Exchange announced a ban on funding property projects with offshore borrowings early this month.

Analysts estimate that investors from Hong Kong and overseas account for less than 7 per cent of activity in the Shenzhen property market, yet a number of the measures are aimed specifically at them.

“Foreigners are generally quite visible because they tend to buy grade A property for the long haul,” says Richard van der Berg, managing director of ING Real Estate Management.

Zhang Xiaoduan, vice-manager of research at brokerage DTZ Shenzhen, says: “At the moment, it is prudent for the government to do all it can to keep things steady, and frankly, foreign investment is easier to control.”

In spite of this, Hong Kong residents continue to be drawn to Shenzhen real estate, either to relocate their primary residence to take advantage of the remaining price gap with Hong Kong, or to speculate on further market rises.

Representatives of Central City, Butterfly Valley, and Chun Hua Four Seasons, three Shenzhen property developments now selling units, report seeing no decline in interest from potential Hong Kong buyers.

“I’d buy into the Shenzhen market if I could,” says Ricky Cheung, a Hong Kong trader who crosses the border frequently. “Prices are going up fast but I don’t think that this market is unsustainable.”

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