Shenzhen, the southern city known as China’s Silicon Valley, could be losing its lustre due to a housing affordability crisis. Led by Huawei, talent, resources and money have been flowing out of Shenzhen to cheaper locations, in particularly Dongguan, about an hour’s drive north. Home prices in Shenzhen rose 508% in a decade. Nanshan, in southwestern Shenzhen, has been the breeding ground for its hundreds of hi-tech start-ups and listed companies, housing China’s top innovation companies such as Tencent and ZTE. However, its prohibitive property prices are scaring off talent and causing a headache for young hi-tech firms looking to expand their operations. Start-up have to offer ever higher salaries to try to attract talent. One company raised salaries by 20% last year, in large part to help its employees deal with rapidly rising rents. The cost of renting a home in Shenzhen climbed 23% last year, according to Homelink, with those in Nanshan district jumping 46.2% year-on-year to top the list. Shenzhen made headlines last year for having the world’s fastest-rising house prices according to real estate firm Knight Frank. They surged almost 50% last year to an average of CNY31,425 a square meter, more than double the average in Guangzhou, the capital of Guangdong province, but the average monthly salary in Shenzhen – CNY7,631 according job168.com – is only 10% higher than the average in Guangzhou. Dongguan is now home to 7,638 newly registered hi-tech businesses, almost double the number in 2012 when the local government launched an all-out effort to cultivate high-value-added industry. Some analysts fear Shenzhen may share a similar fate to Hong Kong, as soaring costs hollow out the city’s real economy and leave it over-reliant on the finance sector – already the second ranked driver of Shenzhen’s economy, the South China Morning Post reports.