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Who can afford to buy a flat in China? Yesterday was a house warming for a couple friend, the wife being a mid-level public servant official, the husband a managerial staff at a foreign company. Their flat, is a second-hand one of 10 years old, located in a quiet area of the medium city Zhuhai, approx. 80 sqm2. It still costs RMB220,000. For flats targeted singles in downtown, more than 300,000 for 30 sqm2. This year the housing price has risen 30-40%. And analysts say the later you buy, the more expensive you will pay. For flats of medium class, the average price is +RMB5000 per sqm2. Plus decoration expense, RMB600,000 is needed to move into the new flat. How could common salary and wage earning people afford it (by mortgage)? Even for a couple have annual income of RMB150,000 it is a heavy burden. They must pay back the bank for over ten years. More burden if they have and/or parents to feed. Not to mention for a single who long for owing his/her own room. Really don’t know who have bought the many buildings out of the blooming real estate supplies. Who could afford the half million, over one million flats and several millions houses? Based on current income of common Chinese ppl, the housing price is beyond affordable capacity. If we have to carry the flat on our back lifelong, isn’t it tiresome? Our government has vowed to curb the housing price and forbid leasing land to build villas. Through imposing higher taxes on housing transaction and on profit made fm housing deals, it aims at put down real hoarding and trading in real estate market. A Guangdong high official called for ppl’s boycott of buying flats fm developers in order to force their cut down of prices. Nevertheless, are all these measures and advocates workable? There is one thing called housing allowance but only public servants and employees of large scale companies enjoy it according to law. A vast number of workers cant have it as the result of insufficiency of law enforcement. In the past, Chinese didn’t need to worry abt housing, but now we have to burden it long term. Is it a price of market economy? Or something inexplicit? However, “all ppl should have their own lodging “ should be the government’s ideal and striving goal. Otherwise, complaints fm ppl will be arisen. Based on average income and housing price, Chinese housing is as high as the sky. |
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6/6/2006 8:59 am |
Property is and will always move along with progress.. this is something that Chinese will have to face and prepare for..Most wealth is tied to Real Estate in many contries, If we look at Japan during the 80's, the properties, they elders held, for so long the new generation cashed in on that gained equity and thus fueled much in the economic arena.. The same is true in many countrie's.. Houses that use to cost.. 30-35K US, in the early to mid 1970's, are now seeling for 500K up US. I had a friend who at one time complained in the late 1970's about a 350$US monthly mortage, but later they sold their property for 200k, so that gave them a leg up.. but they also had to invest much to get a montly reduction in mortage expense, but they had cash flow.. and with cash flow one can perform in other ways. I have a Home in LA, and that's an expensive market, I have two home in the state where I am now... but each month I make money even as it cost me, monthly .. I for each improvment I do, it adds value..My home where I currently life is the highest in curb appeal,and I bought a 4bdrm, because it's value is stable..with a large lot.. I have a 3 brdm that I rent out, and have plans to acquire 2 more properties, hopefully within the next few months..and then I'm going to focus on vacant land. This change is not going to go away, I do expect that China, will change it's mortgage span, to the stad 30 yrs.. but we now have 40-50 yrs. plans.. the point is... you can never own anything, because even if you pay for it, if you fail to pay the tax, even after the debt is repaid, you will loose it.. but, you have the managment of the equitable worth and the exclusive managment of it... but tax, is what makes and supports the city structures that the house is located.. In the US, the standard before was, that one had to earn 4 times the monthly payment, but the variatable rate mortages changed those ratio's.. to make homes more affordable and qualifying more simplified in ease of attainment. May I suggest, that one would look at city planning, and buy on the frindge of developments, and pay attention to the proposed city expansion, and thus in 10 years, you can see very high % gains in appreciation. there are many many ways to work it... But for certain with China's population, land is and will remain premimum.. China has a large cash reservem, but it is smaller than it actually looks, when you consider the triple magnitude of the population, and the disparity of the income average across the contenient.. therefore that money becomes much smaller, and thus too. the currency valuation, China is fighting such a move, because it would change much, and that is somewhat impratical in the country that has a communist system...and such a vast gaps between income averages.. and corporate ownership and distribution of resources of industry.. All this ..has many factors... that too equate in many ways, that ... if the currency is re-valued, one would be better to have some grasp on property now... before such a move.. but ... there is needed a great effort and work of national investments to bring together the outer provinces to meet and blend and match the mega metro areas...and that is no easy task.. We see much if we look at the pace of China's.. rebuilding of the many areas that have been damaged by natural disasters... that progress is slow, the building codes need changing and much else, of enviormental and land studies, therefore they cannot just go and rebuild..so the great cash reserve is of a different nature than the world can comprehend, but internal politic's in China, see this.. and know this, they cannot move into democratic reforms, because of the vast differences in clans and languages.. that can be a very destabalizing factor,.. not unlike the Break up of the Soviet Republic, therefore, the managment of the internal resources is a slow process, and thus captatilism will blend itself, but in measured steps, and thus... that means... land ownerships and land value will be a founding factor in many ways...and some forms of taxation and regulations on development.. otherwise, capatilism will bring some very challenging power struggles.. of more sorts than maybe the nation is willing or prepared to face at this stage.. Bottom line, is invest in what one can... because things change, and people who have some level of ownerships and equitable stake, will always be the one's who have the accessibility to move and adapt to the changes.. Look at the very wealthy and look at the very poor... and you will see much in the middle... and choose whre you want to stand.
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6/6/2006 9:06 am |
China, has also under-reported the medium income of it's people... a two person household, some work not one job but two jobs, and thus that changes much in what is the medium average income.. Internally the government understands this, but they have to function from a conservative stance in such reporting.. to compensate for those who do not work two job, or have 3-4 incomes comming into a household..and the factor, of other income generating activitites that people engage.. so... the prices of the homes.. becomes more affordable when looked at in these real time terms... 30-75,000$ US. equivalent, is fairly on par with the world economy of property value.. for a medium 2bd 1 ba, xxx lot, property, in an area that has all the public utilities and proximity to the metro community and business enviornments... We really have to look at much to grasp the economic nature of our enviornments.. and affordability .. takes on a different view.
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Goan I am not surprised for westerners paying off house/flat at 30 years term. Hong Kong ppl have long been doing this and now Chinese also. But by comparison based on each country's own currency, In yr small city, housing is worth between 200,000 and 500,000 Australian dollars on average, may i know how much that ppl in yr city earn averagely each month? After i get your feedback, we can compare the ratio of housing price w/income.
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Touch You astonish me! You are a smart investor on real estate. That's why you could go for 4-year world free trip bcoz you have regular income fm rental of your paid off houses. Another investment tips you point out is to buy the houses/flats in the fringe or outskirt, and then wait for the prices come up in the very near future. Friends, pls consult touch for investment. He's not only a sensitive writer but a sensitive investor on housing. The problem is, only a few can afford to make investment. And, if more ppl buy houses/flats for investment but not for own use. It's this kind of market act that puch up the housing prices. There are ppl who have no room to live in. There are ppl who owe several houses/flats to profit fm.
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Touch You seem to grasp quite comprehensive China information. Yes. Problems have occured. Now China is more or less under urbanization. The vast population needs housing in cities/towns. There's not much land to build new houses now after 30 years industrial developement, big land built into factories. By the way, the land ownership in China is not permanent but on a 50 years lease basis. Now the building of housing tends to be highrise. If you move inside, you would feel as if living in a cold box. The problem for Chinese housing is that the housing prices are far beyong common income ppl's affordablity. The disparity gap on income is very great. Another phenomenon is that there are no low to medium price housing available. Developers like building high class villas and resort-like flats, targetting at high end market. Common ppl's need are ignored. Before, only HK/Taiwan/Macau investors go inside China real estate market, which still pushed up the prices. Now, lots of foreign fund come into the market. Goofoo! One office worker who has worked in Shanghai sighe, "i work ten years here but i cant buy a washing room." Another thing i'd like to tell you as you notice the cash reserve of China is high: Chinese ppl cannot put all or most of their money into housing or enjoyment but like saving cash, quite different fm Americans. Why? Bcoz we dont have a supportive social security or insurance system. We need to think everything for ourselves: medical, housing, aging, everything. But ironically, still, we need to pay high income tax to sustain the state while the state so far does not support you at all. But it's understandable, we have so large a population, so inequal btw provinces, we have to bear all these.
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6/6/2006 9:35 pm |
there are methods, of financing, there are 100% loans, by the way, no I don't have "Paid off" property...  but, what I do find is that people are willing to work with you if you present the package... one thing for certain, one has to think of.."money is no good unless it's working"... and that's the principal that banks function on.. we just have to present what is required in the format,that suits the progressive beneift of both..Look around at what you said... people have no room to live.. " there are small units that can be purchased and moved to a land location that can be what they call " studio flats", the investment is less, but this is something you would work an agreement with a manafactuer of pre-fab units.. but also there was a special on, where some men, converted sea containers into living spaces... it's just a matter of adding windows and doors, and they are stackable... they are paintable, and very sturdy.. so the options are endless... but creativity ... is the grace that ... uncovers the avenues...  interactivity in the market is what value is based upon, and without value there is limited motivation.. and China, is a great place for the right natured developments, even in the light of the current constrictions.. it's then all about %.. and using the capital gains in other higher yeild areas, but you can work both markets... I'm in a merket that I care not about the markee properties, I can't afford that market, but the avg, home.. market I can work in.. and there are some moderate markets.. but , I actually would like to progress to developments of things... as I mentioned in an earlier blog, to develop entertainment complex, and etc... you have identified a market... when you say there are people who hae no place to live.. but they work i'm sure.. and that.. the market.. money is always in motion... it's a matter of trying to catch the cycle.. and spin with the wheel.. and try and go from the outer part of the tire, to the hub, the revolutions are shorter, and the vibration are less. .. but it all... centers in motion to the axel at the center of the hub.. get on the tire, catch a spoke and ride it to the hub... and you'll be fine..
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6/6/2006 9:58 pm |
China is very interesting in the economic dynamics.. there will come changes .. because the outreach of the populus will effect change.. just by the principals of nature of business. standards will require building conde enforcment, and that is what will propel the market to build for the common people.. the current drain on taxation will surely not vanish, but the usage of public funds has to be utilized, at present , is it not true that China has the second larget highway infrastructure in the world.. and that makes for paths way to travese the landscape.. that is where the building boom can build outside of the metro's, and the land that now looks un-usable, will become usable for building... heavy equipment can change the desert into an oasis.. the wise will study the progress charts, and the growth expansion... and buy that they can later secure themselves in their retired years.. it's a self help type of social security.. Truthfully, the US system, of welfare and county aid programs..is nothing more in base terms a method of population managment.. it creates a cycle that cycles itself.. that is why we have 2nd and 3rd generation welfare recipeients.. they cannot earn enough to grasp a hold to move above this .. there are a few who make great sacrifices in many categories, to propel their offsprings to rise out of such.. but the generalized climate of this is .. self prepuating.. I say that, to avoid a long summary of details.. The saving of the Asian people, are not only in cash, they manage food and other resources well, to get the greatest usage out of it, here in the US, there is awaste factor, because it's a habitual process, and the socio-economic is related to buy and sell and sell and purchase more..thus we have a society that is hooked on disposable products, and over consumption, and it's a mrk of status that is actually a very negative cycle not only in the economics, but the eco system, the psyce-social level and thus we have a valuation disparity of individualsim..that is again the roots of segerations that is the roots of racisims rise... we see it now in the much debated border situations.. but that's different subject.
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Goan, Then the income/housing price ratio is similar to China. Averagely, very common couple earn RMB2000-3000 and need to pay the very common apartment fm RMB300,000 to 600,000. Gourmet Yes all the prime area of metropolis, the housing price is expensive. There are poor ppl but there are also very rich bunch (like you) who can afford it. I am just curious how the housing price could rise up so quick, here in Macau this 0.5m small village city, the price has risen up 3 times. Your encouragement to young ppl are indeed good. Wish i've met you ten years ago when i was younger Normal ppl's income increase never could catch up the inflation speed.
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But Gourmet, Horrible if need to pay the small apartment by two lives (generation) of the family. Why not live in the outskirt where it is much cheaper? But time on transportation is a problem. That's why i never like big cities.
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