China's crazy property bubble By Pauline Chiou, CNN November 8, 2013 -- Updated 0217 GMT (1017 HKT)
STORY HIGHLIGHTS
Despite Beijing moves to cool the property market, prices continue to rise In Beijing, home prices were up 16%, Shanghai 17% year-on-year in September Economist: "The problem is Chinese people have very few investment vehicles" Central leadership expected to discuss reforms at the plenary session starting Saturday
Beijing (CNN) -- Cui Shufeng is a retired government worker in Beijing. She is one of the lucky homeowners who bought her place long before the housing sector galloped out of reach for the average Chinese salary worker.
"It is ridiculously high," she says pointing to apartments in her neighborhood. "These homes near the school here are CNY 70,000 (USD$11,400) per square meter. It's not even worth 7000 yuan (USD$ 1140) per square meter because it's not even good quality."
Her concern is on the radar of the central leadership that is expected to discuss economic reforms at the plenary session starting Saturday. For Chinese leaders, the property sector is an emotional and political hot potato. The dream to own a home is a far out of reach for tens of millions of Chinese citizens.
In the latest housing data, new home prices for September rose at the fastest pace in almost three years. In Beijing, new home prices were up 16%, Shanghai 17% and Shenzhen 20% from a year ago. Myanmar experiences property boom London's last $150k apartment Marital property rights in China
"The problem is Chinese people have very few investment vehicles. They've lost trust in the stock market so they turn to real estate," says Xu Si Tao, China Director of the Economist Intelligence Unit.
Xu says the central leadership needs to make bold steps in financial reforms to give citizens more options to invest their money.
One measure China is considering is to allow banks to set their own interest rates, creating more competition.
I was in Beijing two weeks ago and visited a luxury villa compound. It was a large site with tens of dozens of completed but mostly empty villas. A worker in the sales office told me the average home was priced at CNY 23 million (USD$3.8 million) and most were sold. He said half were owner-occupied (though I saw very little sign of residents) and the other half purchased as investments.
I was told the supermarket in the center of the compound was open and often used by residents. It was clearly still under construction. When I pointed this out, I was then told the grand opening would be next year. Message: The bubble is alive and growing. These villas are a pretty -- and by most appearances, empty -- place to park money.
Cui shakes her head at the dilemma facing the government. She doesn't believe recent curbs will work like a ban on third home loans in Shanghai.
"I don't think home prices will drop sharply because our economy is still doing okay," she says. "Our child bought a home in the U.S. recently. The price was about the same as a flat in Beijing, but the area is a lot bigger and the quality is much better."
Beijing (CNN) -- Cui Shufeng is a retired government worker in Beijing. She is one of the lucky homeowners who bought her place long before the housing sector galloped out of reach for the average Chinese salary worker.
"It is ridiculously high," she says pointing to apartments in her neighborhood. "These homes near the school here are CNY 70,000 (USD$11,400) per square meter. It's not even worth 7000 yuan (USD$ 1140) per square meter because it's not even good quality."
Her concern is on the radar of the central leadership that is expected to discuss economic reforms at the plenary session starting Saturday. For Chinese leaders, the property sector is an emotional and political hot potato. The dream to own a home is a far out of reach for tens of millions of Chinese citizens.
Interesting. New higher-end apts were at about RMB10k/sqm 15 years ago. I could have bought the apt I was living in in 2003 for about RMB6k but it was nearly 10 years old at the time and banks would not lend on existing housing at the time. Good luck with 7,000. Plenty of nice established apartments in Beijing going for around the 30k today.
But once you get out of Beijing and Shanghai, you can buy an apartment for less than RMB10k/square metre. Most of the developers' costs are in the land usage rights.
If the dream to own a home is out of reach for tens of millions of Chinese, then I guess it is within reach for well over a billion? Sounds about right. Most women won't marry a renter.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
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