Why is the housing price so high in China? How many decades does it take for common people in China to buy an apartment in the big cities of China?
Anne, lives in Christchurch, Canterbury, New Zealand
I would like to know the reason as well. That is something go nment can’t explain, economist can ’t explain, and everybody can tell but nobody can tell why.
There are some widely spread reasons that most of people agree with:
1stPeople lives in countryside wants to move to city, people who lives in small city(1m population) wants to move to big city(8m population), people who lives in big city wants to move to super city(beijing, shanghai, guangzhou, shenzhen);
2ndThe house or apartment near a good school(primary school, intermediate school, high school) is limited, and if you not living in the school zone, your children can’t enter that school.
3rdGood schools are limited as well. and if you can’t enter a good high school, you could hardly get a high score in the university entrance exam(gaokao) to meet their requirements.
4thRich person buy more house and get richer, poor person can’t afford their first house and become poorer. Decades and decades, 80% resource is occupied by 20% person, in China, the gap is even worse.
5thI can’t think of any reason else.
Parsley Only, dont judge
Before my answer starts, what I want to show you guys firstly is that I’m not professional at all in my English and the price of the house. This is just a trying for me to organize my words in English.
1stOne guy who earns a average salary wouldnt buy a house in the cities you said.(if on self efforts only) During my college times, I almost was a Beijinger for 4 years and now I work for a company in Hangzhou, that some of my colleagues(superiors may be more suitable) bought one or more house in Hangzhou. And those guys I know who bought a house earns at least twice of the average.
2ndWhat is really pensive not the house itself, but the land where the house lies in . In China, only the go nment has the ownership of land. In cities or town, who wants to use the land must pay for rent. But in countryside, people dont need to pay for the land where houses lies in. There is a local name for the kind of land named “zhai ji di”.But the cities have better conditions for education, medical treatment, jobs and convenient life than a village.
Ian Flanagan, Beijing Office Market Research Analyst (2016-present)
Originally Answered: Why does China have a high housing price？
I agree mostly with Sean’s answer and add a few points:
There is no property tax for residential properties in China (in the UK it’s called council tax). This means there is no annual fee for owning a property, and this encourages richer people to buy more properties for investment. Though there has long been a push for this tax to be introduced (and limited test cases Shanghai and Chengdu), I can’t see it happening within the next 5 years, due to thedifficulties of registering and valuing all residential properties.
Looking over the public asset class returns over the last few decades (say 40 years), real estate has been the only one to beat inflation. If you fully invested in anything else, you would have actually lost purchasing power. This has left a very powerful impression on private (and to a lesser extent institutional) investors, who expect capital value growth to continue for a long time.
By some estimates, 50% of Chinese people still live in the countryside. There are still huge migration forces still to come, with Tier 1 cities high on people’s list of destinations. Many cities are already reaching unmanageable,sprawling sizes, with limited land supply for new housing. There is no way this can meet the huge demand from people hoping to move to big cities.
I would also add that China is a huge and diverse place, and it’s meaningless to talk about a single house price for the whole country. Just be aware that this question (and answers) apply mostly to housing in the Tier 1 cities (Beijing, Shanghai, Guangdong, Shenzhen), where supply is limit and demand is strongest.
In one way of looking at it, the house price in Beijing is not as high as it really should be by market forces. There are sweeping restrictions on purchasing: e.g. you must live in and paid tax in Beijing to be eligable to buy; second residence purchases are strong restricted; minimum down-payments for mortgages have been increased. These are all controls that the go nment can tweak to control how much real demand actually reaches the market.
Chris Garcia, Executive Management (1990-present)
You dont have the complete picture.
In the three major cities of Guangzhou, Beijing and Shanghai property prices are extremely high. First of all, why? Although the issue is supply and demand, theres more to it. Look at Beijing, for example. There is plenty of undeveloped land that can be used for residential purposes, but land supply is controlled directly by the go nment. The prime source of go nment revenue is the income generated from go nment lease (land is never sold) of land to developers. To ensure go nment coffers stay full, the go nment restricts the release of land for development.
Another issue is property speculation. Chinese like to save. Banks, however, pay low interest while the stock market is only for fools. People invest in property knowing the returns are substantial. It is extremely common for monied individuals to buy more than one property for investment purposes thus restricting housing supply even further.
Population. People from rural and lesser developed cities flock to bigger cities — especially the Big Three — for the economic and educational advantages unfound in their hometown. These people can increase the population of a city by 100% or more. This creates housing strain.
So how do people buy houses? Its not as difficult as you think. First of all, your numbers are far off. In Beijing, nearer the center of the city housing prices are roughly 70,000 RMB per m2. When you get further outside they can decrease to about 50,000 RMB until you get on the fringes of the city and they might be as low as 40,000 RMB. The median salary in Beijing is approximately 6,500 RMB per month. The vast majority of families, unlike in the US, have two wage-earners. The household income of 13,000 RMB would be used to qualify for a mortgage. Unless it has changed recently, a 30% cash downpayment is generally required. To obtain this downpayment people pull in money from their savings (remember, Chinese are savers) and from their parents / in-laws. Another source is the money they have accumulated in their mandatory salary deductions for housing.
Chinese houses are generally small. On average, for a family of 5 (husband, wife, child, two grandparents), the house would be about 70 m2 and cost roughly 2,800,000 RMB ($406,000). They need to finance an amount equal to about 13 years of salary. Its a struggle, but the main expense is housing. Food and transportation is very cheap. Medical care is relatively cheap. Schooling can be inexpensive, too. With a housing payment of 10,000 RMB per month, they can still survive.
If you crunch the numbers, if both spouses only earn 6,500 RMB per month, they are doomed as far as home ownership. One would have to earn quite a bit more.