Dandong is a little-known border city between China and North Korea which sits across the Yalu River from North Korea. Since North Korean dictator Kim Jong Un announced a severe softening of foreign policy towards America, with a likely meeting between Kim Jong Un and Donald Trump later this year, demand for homes in Dandong has hit an eight year high.
Property Sales figures
In March this year new home sales in Dandong hit an eight year high of 320,000 m² and while they fell back slightly to 290,000 m² in April, there is significant growth in underlying demand. It was also interesting to see that while Dandong property prices rose by 4.1% in March, compared to the corresponding period last year this was actually below the 6.8% average among similar sized Chinese cities. There is no data available post the announcement by the two leaders of a historic meeting later in the year but we can guess safely assume prices have increased significantly.
There are already rumours that the Chinese government is “watching” property prices in Dandong after introducing draconian measures to try and avoid property price bubbles in some of China’s largest cities and towns. In reality it would be very difficult for the Chinese government to hold back what is becoming a relatively strong wave of optimism with regards to North Korea, South Korea, the US and Chinese relations. Indeed, would China want to be the party pooper in this potentially new era of cooperation?
Trade links with North Korea
While last year saw a reduction in North Korean exports to China of around 33%, with imports to North Korea up 8.3%, it is difficult to track legal and illegal trade with the isolated nation. In a sign of historic times, back in 2014 the New Yalu River Bridge was completed although ironically there are no road connections on the North Korean side. While the bridge is only wide enough for a single lane of traffic and one rail line, it is an iconic link between China and North Korea.
If the US government is able to secure a historic agreement which would see North Korea publicly disassemble its nuclear arsenal, surely trade agreements with the US would follow? If a peace treaty was signed between North Korea, the US and South Korea, the South Korean border would likely open but Dandong still presents a very interesting route through China into North Korea.
Balancing the risk reward ratio
There has never been a more iconic balance of the risk reward ratio than when looking to invest in property which could directly benefit from North Korea coming in from the economic cold. Dandong property prices have for some time underperformed similar sized cities across China although things may be changing. There is already the making of an infrastructure link between China and North Korea and many businesses will be literally falling over themselves to secure a presence in the area.
Even during his relatively short time in office we know that nothing is ever straightforward with Donald Trump, but his gung ho approach to the North Korean problem seems, although we say this quietly, to be working.