BUYING AND RENTING A HOUSE IN CHINA

HOME SALES IN CHINA

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Shanghai suburb
Home sales rose at a rate of about 30 percent each year from 1998 to 2009, according to Centaline, China’s biggest real estate brokerage. The annual rate has slowed to about 10 percent since 2010, according to the brokerage. Growth in the early 2000s was driven by tax rebates and other incentives to encourage home buying as the nation’s property market was opened to private ownership, he said. Home sales continue to rise this year because of economic growth, supportive credit environment and government reforms including the easing of the one-child policy, said Sigrid Zialcita, head of Asia research at Cushman. [Source: Bloomberg News, January 20, 2014]

For decades, state-provided housing was a Marxist birthright for all Chinese. Modest abodes were distributed through an individual's work unit, known as a danwei. Up until fairly recently many urban Chinese lived in apartments supplied for free or nearly for free by their factories, work units, or government agencies. In 1990, a typical three-member Shanghai family paid about 60 cents a month for an apartment of 20 square meters. The distribution of housing was strictly controlled by government-controlled "work units."

The government abruptly ended the entitlement for housing in 1998, privatizing property by allowing urban dwellers to buy their assigned residences at bargain prices. Anyone who declined could continue to rent from the state, but at continually higher rates set by the government. The transformation was nothing short of radical. Residential property has become an engine behind China's surging wealth and middle class. With land values suddenly unleashed, residents who bought their former state-owned homes could later sell the units at immense profit to developers looking to replace them with teeming blocks of high-rise apartment towers. These days, housing is many places is no longer strictly controlled by work units and the policy of cheap rents has largely ended except for people who have state jobs.

China’s 2013 New Home Sales Hit $1.1 Trillion, Record High

China’s new home sales in 2013 exceeded $1 trillion for the first time as property prices in first tier cities surged in the absence of more nationwide property curbs. Bloomberg reported: “ The value of new homes sold in 2013 rose 27 percent from 2012 to 6.8 trillion yuan ($1.1 trillion), National Bureau of Statistics said in a statement today. “Clearly, the real estate market in China remains hot,” Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole CIB, said in an e-mailed reply today. “Urbanization and investment demand are leading to rising sales volumes, while prices continue to gain. China’s growth remains heavily dependent on the real estate market.” [Source: Bloomberg News, January 20, 2014 ><]

The value of new housing sales was 5.4 trillion yuan in 2012, an 11 percent gain from the previous year, according to the government data. Investment in homes, office buildings, malls and other real estate gained 20 percent to 8.6 trillion yuan last year from a year earlier, according to the statistics bureau data. New property construction rose 14 percent to 2 billion square meters (21.5 billion square feet).

New-home sales volume rose 18 percent to 1.2 billion square meters, the government data showed. New and existing home sales in the U.S. were about $1.1 trillion last year, including $149 billion of new homes sold, broker Cushman & Wakefield Inc. estimated, based on U.S. Bureau of Census data. China’s existing-homes market is about one-third of new homes by sales, according to Centaline Property Agency Ltd., because the nation only allowed private home ownership in 1998. The government doesn’t release data on existing-home sales.

High Real Estate Prices in China

Real estate prices have skyrocketed in recent years, The costs of new apartments in many cases is equal to 10 to 15 years of income for middle class professionals and is all but out of reach for most people. Even those who can afford it don't want to make the sacrifice of devoting more than half their income to mortgage payments. Almost one-fifth of respondents in a Renmin University of China survey gave a zero score to the government’s property policies, indicating “near despair” with housing prices, the official China News Service reported. [Source: Bloomberg News, January 20, 2014]

In 1998, the purchase price for a typical two-bedroom apartment in Beijing was listed at around $10,000 but could be brought for as little as $3,000 with incentives and bonuses. In 2000, the price for a two-bedroom unit in a new boxy "green oasis" apartment in Shanghai went for around $30,000. To afford this a family needed to pay $208 a month on a seven-year mortgage from a Chinese bank. A three-bedroom unit went for $60,000. In 2006, a 70-square-meter flat in Beijing cost around 1 million yuan (US$146,443) in 2006. In 2010 it was worth more than double that, 2.1 million yuan.

Wu Zhong wrote in the Asia Times, ‘skyrocketing housing prices are an emotive issue in China, particularly in Beijing. Fresh university graduates make about 2,000-3,000 yuan a month if they are lucky enough to find a job. Their total income in a year (without spending) is not even enough to buy a toilet in an average-priced apartment.” [Source: Wu Zhong, China Editor, Asia Times, May 26, 2010]

“Fully aware that high housing prices could become an issue that threatens social stability, Premier Wen Jiabao pledged that his government would keep housing prices in check until March 2013, the end of its term. The State Council has launched tough measures to curb rising prices, such as tightened restrictions on mortgages for second homes, a ban on unauthorized state-owned enterprises investing in the property market, and threats to punish local officials if local housing prices were not brought under control.”

“However, as many analysts point out, keeping housing prices high is in the interests of local governments (to boost revenues from land sales) as well as for local officials (to collude with developers for kickbacks). Reducing housing prices may be impossible unless the central government finds a way to rein in local governments and officials.”

Rents do not rise or fall immediately with sale prices, especially when the property market is highly speculative, like Beijing's. One Beijing resident bought a 70-square-meter flat for nearly 1 million yuan (US$146,443) in 2006. In 2010 it was worth more than double that, 2.1 million yuan, but the monthly rent had only risen by 30 percent, from 3,000 to 4,000 yuan.

The price of housing has risen so much in Beijing, Shanghai and other cities that some people have resorted to living in “capsule apartments.” Modeled after the capsule hotels in Japan, they are about two meters lin, 1.6 meters high and 0.92 meters wide. They are large enough fo many Chinese to stand in but are only furnished with an anti-theft door m mattress, collapsible computer desk and Internet connection. A shopowner and toile is shared. . One engineer invested $6,000 and placed eight of these capsules in three rooms her rented on the top floor of a three-story building and rented the for $29 to $37 a month. Among those that have rented capsule have been migrant workers, farmers and recent college graduates trying to make it in the music business. [Source: China Daily, July 2010]

Many Chinese Can’t Afford Housing

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Beijing suburb
About 85 percent of Chinese urban families can't afford to buy a new city apartment at current market rates, according to the Chinese Academy of Social Sciences, a government think tank.[Source: Vivi Lin and Lucy Hornby, Reuters, March 7, 2011]

Vivi Lin and Lucy Hornby of Reuters wrote: “Owning a home is central to the Chinese dream, but for Beijing residents like 30-year-old Zhang Xinyuan, just getting an apartment seems like a dream that may never become reality. A teacher at a prominent university in Beijing, Zhang is a member of the country's growing middle class. But her salary of 80,000 yuan ($12,179) a year has not kept up with the pace of rising property prices...It will take nearly 10 years just to afford the down payment for a 100 square meter apartment in Beijing.

Affordable housing has been high on the political agenda at China's annual National People's Congresses, reflecting widespread frustration over housing among Chinese citizens and the media. Premier Wen Jiabao pledged in March 2011 that the government will build 36 million units of affordable housing by 2015. He pledged 10 million units of additional affordable housing this year. Last year, planners pledged 5 million units of affordable housing would be constructed, but there is no official data on how many were completed.

According to Bloomberg: Former Premier Wen Jiabao stepped up a three-year campaign in March 2013, ordering higher down payments and interest rates for second-home loans in cities with “excessive fast” price gains. His successor Premier Li Keqiang has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies since November. Shenzhen, Shanghai and Guangzhou have all raised minimum down payments for second homes to 70 percent since November. “The effect of those measures was limited last year because in first-tier cities demand still outpaced supply,” Ding Shuang, a Hong Kong-based senior China economist with Citigroup Inc. said in a phone interview. Property Reliance [Source: Bloomberg News, January 20, 2014 ><]

“There has been a misconception that China’s property curbs are aimed at cracking down on the market or squeezing sales,” said David Hong, a Hong Kong-based property analyst at China Real Estate Information Corp., or CRIC, a property data and consulting firm. “The country’s economy, especially that of less affluent cities, is relying on the real estate industry.” ><

Owning a Home in China

The government abruptly ended the entitlement for housing in 1998, privatizing property by allowing urban dwellers to buy their assigned residences at bargain prices. Anyone who declined could continue to rent from the state, but at continually higher rates set by the government.

People were only allowed to own or buy homes starting in the 1980s. In the late 1990s people who lived in company housing were given the opportunity to buy housing they rented. Workers in Shanghai, for example, were allowed to buy the 20-square-meter apartments---they previously rented for 60 cents a month---from their companies for about $3,600 (about one tenth of their market value) so the government could raise money. Many people held onto poor-paying state jobs so they would have the opportunity to get a house at this price. Only rich people can afford to buy houses and apartments on the open market.

Home ownership remained somewhat of a novelty but increased in the late 1990s and early 2000. In 2000, 25 percent of the families in Shanghai owned their homes. In Guangzhou and Shenzen the figure was near 50 percent.

With home ownership, the Chinese have gone through in a decade what Americans went through in half a century. In 1998, when the government launched reforms to commercialize the housing market in urban areas few people owned a house or apartment but these days many people do. By 2007, 80 percent of urban households were homeowners, up from 17 percent on the 1980s.

Banks have begun offering mortgages for the first time and families are borrowing money from relatives to come up with the 30 percent down payments. In an effort to get more people to buy, rents have been significantly increased (even so the increase bring rents to only $10 month, still significantly less than $200 mortgage payment).

In some places apartments can be purchased fairly cheaply. In the coastal, manufacturing city of Yangjiang, a two bedroom apartment sells for $7,000. It is possible to buy three or four of them and connect them with doors or knocked down walls.

Housing reforms occasionally force residents to buy their homes.

Anxiety Over Buying a Home

Soaring property costs are a major concern for many middle class Chinese. One Beijing woman who is pregnant and spends a fifth of her family’s income on rent and desperately wants a house before her baby arrives told AFP: “I dare not spend too much on other things before we finally get a house---it has become the biggest pressure in my life. I’ve kicking myself for not buying when I had a better chance.”

Buying a house often not only eats into the savings of the house buyers it can also eat into the savings of parents and grandparents, “If my parents didn’t help us pay half of the cost, we would have big problems affording the house,” one Beijing resident told AFP.

A survey by the Chinese Medical Doctor’s Association of 3 million office workers in 15 cities found that buying property had become the top source of anxiety among those surveyed. In an online poll by Iyaya.com, a web site targeting young parents, 57 percent of respondents agreed with the statement: “having a house may not necessarily bring happiness but not owning one definitely brings unhappiness.”

On the choice between owning a house and being a mistress one Netizen wrote: “When reality weighs down on and you can’t afford the housing prices, you are better off becoming a kept mistress rather than the slave of your house. If you are slave to your house, you are the slave to the whole society; if you are a kept mistress, you are only the slave of your man. Among these two options, you choose the easier one!”

China Home Prices Fall in Most Cities in 2014 on Weak Demand

In August 2014, Bloomberg reported: “China’s new-home prices fell in July in almost all cities that the government tracks as tight mortgage lending deterred buyers even as local governments eased property curbs. Prices fell in 64 of the 70 cities last month from June, the National Bureau of Statistics said today, the most since January 2011 when the government changed the way it compiles the data. Beijing prices fell 1 percent from June, posting the first monthly decline since April 2012. “The falling trend of China’s property market has no sign of improving,” Shen Jian-guang, Hong Kong-based chief Asia economist at Mizuho Securities Asia Ltd., said in a phone interview today. “The key issue is the mortgages, despite all types of local government easings. The high rate is damping sentiment of owner occupiers.” [Source: Bloomberg News, August 18, 2014 ==]

“China’s property market has become a drag on the world’s second-biggest economy, prompting cities to start easing local curbs in June. Thirty-six cities had loosened measures as of the end of last week, according to Centaline Property Agency Ltd., while developers have cut prices since March to lure buyers. The International Monetary Fund has urged China to target slower expansion in 2015, saying the economy faces a “web of vulnerabilities” from rising debt and financial institutions’ exposure to real estate. ==

“First-home buyers no longer received mortgage-rate discounts in 2014. In Beijing and Shanghai, first-home mortgage rates were the same as the benchmark rate in July, while in Guangzhou they were 5 percent to 10 percent higher than the benchmark rate, according to Centaline. Prices in Shanghai decreased 1.2 percent and dropped 1.3 percent in Guangzhou, both the biggest slide since the data began. The eastern city of Hangzhou and the southern tropical city of Sanya had the largest declines in July, each dropping 2.4 percent. The southeastern city of Xiamen and the southwestern city of Dali were the only two places where prices gained in July from June, adding 0.2 percent and 0.1 percent respectively. Developers are offering “moderate discounts,” while buyers are still very cautious regardless of how much developers cut prices, Standard Chartered found. ==

Government Drive to Build Low-Income Housing in China

The central government has made affordable housing a "political task" and threatened to demote local government officials if they fail to meet the targets.David Pierson wrote in the Los Angeles Time, ‘soaring real estate prices are driving China's rich and poor further apart. So central planners are gambling on a complicated plan to build millions of low-cost housing units to bridge the gap. The government said it would break ground on 5.8 million units this year, with an additional 9.6 million dwellings to follow nationwide over the next two years.”[Source: David Pierson, Los Angeles Times, November 24, 2010]

“In most cases, the government will guarantee developers a profit and donate the land, eliminating the biggest cost for builders. Projects will include cheap rentals and millions of new homes in areas deemed slums. Applicants must prove that their income and assets qualify them as needy.” To qualify a household “could not earn more than $6,800 a year and hold more than $54,000 in assets. If they wanted to sell the property, they would have to wait five years and would be hit with a land fee if they sold at market value. They could avoid that penalty by selling to another low-income family at a reduced price.”

“The initiative is an important step for a government fearful of social instability and mindful there may be no bigger challenge than providing modern housing to more of China's 1.3 billion citizens. By assisting low-income residents...China is reaching out to the millions left out of the real estate boom---people whose views of privatization have been colored by forced evictions, greedy speculators and wealthy developers.”

“In the past local governments had little financial incentive to donate land that could be auctioned off for millions and many developers avoided low-income projects, preferring the higher returns they could earn building luxury housing. When low-income housing was constructed some units were shoddily built on parcels miles from city centers and without access to schools, public transportation or running water. Buildings in a recently opened development called Sunny Paradise, 25 miles outside downtown Beijing, started to be demolished not long after they were built because of substandard concrete, state media reported.

“But experts say this time is different. Affordable housing will be one of the central government's chief policy goals, meaning local officials can be evaluated on how well they follow through on construction targets.” Land supplies for affordable housing projects reached about 65 percent of the original target IN 2010, according to the Ministry of Land and Resources.

Chinese Seeking Low-Income Housing in China

Ren Zhiqiang, one of China's richest real estate moguls, caused a stink when he said, "If you can't afford a house, why not return to the countryside?" “But for those unable to seize that opportunity, particularly young people who came of age after privatization, the chance of homeownership has faded as prices have soared out of reach,” David Pierson wrote in the Los Angeles Times. [Source: David Pierson, Los Angeles Times, November 24, 2010]

“Roommates Zhu Haiqing, 31, and Li Yihao, 27, visited the Songjiazhuang Affordable Housing Community on a recent weekday, Pierson wrote. “The two friends run a small grocery store in a distant suburb popular with migrant laborers and were tired of sharing a dingy room. Zhu said his income would qualify, but he did not believe that simply applying would give him a fair chance at one of the apartments.” "You still need connections," he said. "You need to know someone."

‘such skepticism is common. Subsidized units built in previous years have been marred by suspicions of corruption. Reports surfaced of officials winning apartments only to sell them or rent them to others and lying about their incomes and driving luxury cars.” "The perception of affordable housing is not good," Chen Yunfeng, secretary general of the China Real Estate Managers Assn, told the Los Angeles Times . "People think it's not very fair."

But some people want to stay right where they are. Beijing resident Chu Jinfeng lives with her ailing 73-year-old mother in a neighborhood of courtyard homes known as hutongs. All but a few of the surrounding buildings have been toppled to make way for luxury apartments. It won't be long before she's forced to move. But Chu, 52, said she doesn't want to move to the low-income complex assigned for residents in her district because it is hours away from her mother's hospital. "I'd rather live there, but I don't have the money," she said, motioning to the half-completed residential towers rising nearby. "Rich people can live here, and we'll just have to move further away."

Schemes to Help People Purchase Housing

Rising discontent over housing prices among middle class as well as poorer urban Chinese has led the government to roll out a number of affordable housing schemes. [Source: Vivi Lin and Lucy Hornby, Reuters, March 7, 2011]

In Beijing, if an pending application to buy subsidized affordable housing is approved, a person will be able to buy an apartment on the outskirts of Beijing at 30 percent of the market price.

In one project in Beijing, Vanke has developed a tract of formerly industrial land. It offered some apartment blocks at below-market prices of 5,000 yuan a square meter to low-income buyers in return for the right to sell the rest at market prices of about 30,000 yuan a square meter, a sales representative said.

Problems with Schemes to Help People Purchase Housing

But the plans have been riddled with uncertainty, and have done little to soothe people like Zhang, who squeezes into a 5 square meter room while she saves for a down payment."The affordable housing scheme has given me some hope to be able to buy an apartment," Zhang said. "But the chances of actually getting one are quite small, because the government has very strict standards on who should get them, and the procedures are just endless and complicated." [Source: Vivi Lin and Lucy Hornby, Reuters, March 7, 2011]

Indeed, a number of Beijingers declined requests to be named for this article, since they had fudged their financial circumstances in order to qualify for the scheme. Chief among their complaints was that the income level required to qualify for affordable apartments is too low to qualify for bank loans to buy them. Analysts are skeptical on whether the government can really create more affordable housing. Developers are reluctant to construct blocks for sub-market returns, and prime land tracts are still being snapped up for commercially lucrative projects. "Money is an issue, how to finalize the funding for affordable housing projects is a big challenge. Who will develop and build these houses is also a big problem," said Huang Yu, dean of the China Index Academy. "Local governments don't have the capacity to do that, and many government-backed construction companies do not have enough qualification and experience. Another important challenge is land supply."

Even the definition of what exactly is considered affordable housing in China is cloudy, said Michael Klibaner, head of China research with property developer Jones Lang Lasalle in Shanghai. "There is very little transparency on this topic. Lots of different types of development get lumped into 'policy' housing, including small- and medium-sized affordable housing which is commercially developed," he said.

Winning a Lottery for Low-Income Housing in China

David Pierson wrote in the Los Angeles Times, “Like millions of Chinese priced out of this nation's booming housing market, Lao Yang could only dream of owning an apartment. Crammed into a run-down rental courtyard home about the size of a typical U.S. bedroom, Yang and his wife increasingly were ashamed of raising their daughter in a neighborhood with communal bathrooms and charcoal heating.” [Source: David Pierson, Los Angeles Times, November 24, 2010]

“Desperate for a bigger place, the retired steelworker applied to buy affordable housing from the local government. He wasn't optimistic. Though his meager earnings as a sometime construction worker qualified him for a subsidized unit, he had heard that the system was rigged to favor people with political connections.”

“To his surprise, Yang won a lottery early this year awarding him the right to buy a new apartment at the Songjiazhuang Affordable Housing Community. The $35,000 unit in the working-class section of southern Beijing was about one-quarter the price of similar dwellings for sale on the open market.” "I felt so lucky when I got it," Yang, 54, told the Los Angeles Times. With the help of loans from a bank and relatives, he moved his family into a 592-square-foot space, which was five times bigger than their former home. "I've worked all my life for this."

China's "Affordable Housing" Numbers Don't Quite Add up

Lucy Hornby and Langi Chiang of Reuters wrote: What do a luxury Chinese apartment tower, a workers' dormitory, a low-income housing block and an empty field have in common? They all qualify as affordable housing projects under a government scheme that policymakers hope will cool popular anger over high housing prices, and that analysts are counting on to keep China's property sector afloat. [Source: Lucy Hornby and Langi Chiang, Reuters, February 28, 2012]

The program, which targets 36 million units of new housing by 2015 at a cost of nearly $800 billion, has underpinned demand for steel, cement and metals from the world's second-largest economy as the larger real estate sector cools. But the huge numbers don't add up to enough to ease concerns that the Chinese economy is paying the price for the government's crackdown on "speculative" real estate projects. "It's an illusion to try to hang on to the notion that social housing will have a massive pull on raw materials in China. It does have a pull but not significant enough" to make up for freezing commercial real estate spending, said Nicholas Zhu, of ANZ Bank in Shanghai.

To gauge the status of the scheme, Reuters visited a dozen building sites in the dusty city of Shijiazhuang south of Beijing. A middle-income city of 10 million, including satellite towns, Shijiazhuang is one of the few to have published a public list of its affordable housing projects. Tall towers rising from flat fields and former industrial sites laid to rest the assumption of some that local governments are simply faking affordable housing starts to meet central government targets. In Shijiazhuang at least, the projects are real.

Reuters visited projects ranging from tall towers of flats measuring 60 square meters or less -- what most Chinese would call affordable housing -- to factory and school dormitories. At least two projects were part of luxury housing developments. This seems to reflect what is happening across China. Recent government announcements indicate that new off-market, affordable housing units will increasingly be made up of reclassified, non-commercial projects like dormitories attached to schools, hospitals, government departments and state-owned enterprises. "There's a big difference between government definitions and what a normal person would consider an 'affordable house'," said GK Dragonomics research manager Rosealea Yao.

Reclassification jibes with a shift in official targets from housing starts -- which critics charge are easily faked -- to completions. Beijing targets 5 million completions this year, up from the official count of 4.32 million completed last year. Nationwide, affordable housing numbers are confusing. Premier Wen Jiabao said last year that China would build 36 million units by 2015, with 10 million to start building in 2011 alone, as citizens seethed over red-hot property prices. Beijing then retreated in the face of limited local budgets and allegations that corrupt insiders get dibs on homes. It shelved plans for subsidized apartments to sell to low-income buyers in favour of modest apartments to rent to the poor. The target for 2012 starts is now 7 million units. Many analysts felt that the original target was so far from reality that actual starts this year may exceed last year.

Impact of Questionable "Affordable Housing" on China’s Economy

Lucy Hornby and Langi Chiang of Reuters wrote: But a good portion of what's being built is already-planned construction re-labeled as affordable housing. Those projects aren't delivering the additional demand for concrete, steel, glass or aluminum window frames that typically ensure that construction gives an outsized boost to economic growth. If the affordable housing program cannot deliver additional demand, the restrictions on commercial housing may deliver a greater blow to the broader economy than Beijing intended. For two years, China has restricted bank lending to the real estate sector and limited citizens' ability to buy multiple homes, or homes in other cities, to curb speculation in high-end housing. The campaign has finally started to impact prices. [Source: Lucy Hornby and Langi Chiang, Reuters, February 28, 2012]

Official, yet widely disbelieved, statistics put affordable home starts at 10.43 million in 2011. Bank of America Merrill Lynch estimates that the number of units actually under construction will rise to 7.3 million in 2012 from 3.7 million in 2011. "Social housing starts have been overstated, but still the increase in construction of off-market housing will more than offset the fall in the market segment," said a recent report by Beijing-based consultancy GK Dragonomics.

Not so, says ANZ's Zhu. His back-of-the-envelope calculations show that government targets for affordable housing would absorb only about 50 million tones of steel. That's only one-sixth of China's construction steel output, meaning that the real estate freeze can still create a dangerous glut.

Politics and Shady Practices Behind "Affordable Housing"

Lucy Hornby and Langi Chiang of Reuters wrote: Even if reclassified projects don't represent new demand per se, they could allow the government to declare victory and relax the controls strangling the commercial property sector. Three sites visited by Reuters in Shijiazhuang turned out to be newly completed dormitories. Two were at factories and the third was a teachers' dorm for a rural high school. [Source: Lucy Hornby and Langi Chiang, Reuters, February 28, 2012]

Beijing is "taking a two-pronged approach of temporarily repressing demand for commercial units and also building lower-priced housing for the population that's been priced out of the commercial market," said CLSA strategist Andy Rothman. "Once they make progress on both fronts they can ease the current restrictions on commercial home sales."

Some property developers are committing to build affordable housing to get approval for more lucrative developments. That lets local governments balance their budgets with land sales. Some cities use "slum clearing" to move poorer residents out of the valuable city centre and auction off the land to yet another glitzy developer. As of 2010, about 90 percent of Shanghai's "affordable housing" units qualified as "slum clearing," versus 40 percent nationally, land use data showed.

At the luxury "European Landscape" compound in Jinzhou, near Shijiazhuang, an affordable housing block was tucked into a commercial development with decidedly upscale ambitions. "The top sterling villa-community of Jinzhou! The ecological slope-courtyard, the coastal holiday-villa!" a brochure boasted. "European Landscape" and its sisters target demand for investment properties at the high end of the market.

But urbanizing China needs new homes for young couples and replacement for the cramped quarters endured by many, especially migrant workers. GK Dragonomics estimates that 40 percent of people in Chinese cities don't own their own home. China needs to build 10 million units a year until 2030 to meet a 70 million unit shortfall and upgrade shoddy housing.

"All we are waiting for is for the real estate developers to recognize they have got to switch away from the speculative real estate market to affordable housing - not just the ones the government is requiring them to build, but affordable housing in a wider sense for first-time buyers," said Rafael Halpin of MEPS, a British steel consultancy. "Once you see that transition, you have a second property boom driven by real demand."

Real Estate Divorces and Getting Around Real Estate Rules in China

Reporting from Shanghai, David Barboza wrote in the New York Times, “Worried that housing prices are spiraling out of control and threatening social stability, the central government regularly rolls out measures aimed at damping demand and weeding out speculators. Then home buyers, sellers, property developers and even local governments — which are typically heavily dependent on land sales for income — try to find ways to get around the restrictions. “They always do this,” said Du Jinsong, a property analyst in Hong Kong for Credit Suisse. “When they implement new measures, people are always trying to circumvent the rules.” China’s housing market has been one of the prime engines of economic growth in the past decade, and recently a sharp upturn in prices has reignited fears about inequality and a housing bubble. [Source: David Barboza. New York Times, March 8, 2013]

“When the Chinese government announced new curbs on property prices, homeowners bombarded social networking sites with complaints. They formed long lines at property bureaus to register to sell their homes before the restrictions went into effect. And some couples went even further: they filed for divorce. Divorce filings shot up here and in other big cities across China this past week after rumors spread that one way to avoid the new 20 percent tax on profits from housing sales was to separate from a spouse, at least on paper. The surge in divorce filings is the latest indication of how volatile an issue real estate has become in China in the past decade and how resistant people are to additional taxes. [Source: David Barboza. New York Times, March 8, 2013]

“They always do this,” said Du Jinsong, a property analyst in Hong Kong for Credit Suisse. “When they implement new measures, people are always trying to circumvent the rules.” On March 1, 2013, a series of new property measures that analysts say unsettled the housing market. In its statement, the State Council, or cabinet, said that local governments should strictly enforce an earlier rule that ordered people selling a secondary home to pay a 20 percent tax on the profit. Almost immediately, housing administration bureaus and real estate trading centers in big cities were flooded with people hoping to sell their apartments before the restrictions took effect. And in a bizarre twist, marriage registration centers in Shanghai, Nanjing, Wuhan and other big cities were also inundated with couples who admitted they were filing for fake divorces in hopes of avoiding the property tax.

By filing for divorce, many reasoned, a couple with two homes could then claim that each had only one home. That way they could technically avoid having one of the homes classified as a second home, which under the new rules would be subject to the 20 percent capital gains tax if sold. After the divorce and the sale of one of the homes, the couple could file to be remarried. Here in Shanghai, a registration center in the Zhabei district said it had a record 53 divorce filings in one day, well above normal.

A few days later, at a marriage registration center in the Pudong district, a 33-year-old woman named Frances Tao arrived with her husband. She acknowledged that they were filing for divorce, not to avoid the 20 percent capital gains tax on second homes, but to get around another restriction, which requires home buyers to put down a much higher deposit on a second home than on a primary residence. Ms. Tao said that by divorcing, one of them would be able to purchase a first home and put down less money and get a better interest rate. “We don’t have other choices,” Ms. Tao said. “But the government and developers continue to make a lot of money.”

Changing Homes and Lifestyles

As Chinese becomes wealthier and can afford better housing the way they live is changing. In the old days Chinese families lived in crowded apartments. Often they worked, ate, worked, socialized and relaxed around a single table and slept in the space next to it. Walls were covered with pots, utensils, clocks, books, clothes. Bags and tools were hung from the ceiling.

As living spaces have gotten bigger, people have gotten their own rooms and more space but have also become more isolated. One young Chinese architecture professor told the Washington Post, “When we got a living room, I thought what is the use of a living room? I thought it was crazy to have two bathrooms. Now bedrooms are just for sleep.”

Rip Offs and Bean Curd Construction in China

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People often buy homes and apartments before they are finished. Developers often promise all sorts of things---community swimming pools, tile floors, imported light fixtures, health clubs and tennis courts---before the construction is complete but fail to deliver as promised. When residents try to fight back in some cases the developer shut off their water and electricity.

There have been cases where people were required to put down a 20 percent deposit for new apartment and the apartment was never built and the buyer didn’t get his deposit back.

The boom in Chinese construction has to led to the building of many unsafe buildings. One example of this "bean curd construction" occurred on December 2000, when a shopping mall collapsed in a suburb of Dongguan, a city in southern China, killing eight people and injuring 32. The disaster occurred because developers tried to add two additional stories to a building with a foundation built for one story. One witness told Reuters, "There was a loud rumbling sound and I thought it was an earthquake. But within seconds, the whole building just crumbled before my eyes."

Getting Kicked Off Your Land in China

The state owns most of the land. Until recently people only had rights to own buildings and lease land. In recent years, large amounts of land have been expropriated by developers, in cahoots with corrupt officials, who fail to offer residents fair market value for lost buildings and homes and who often employ bullying tactic to drive the residents off the land.

`See Land Seizures, Agriculture, Economics, Destruction of Old Neighborhoods, Urban Life

Image Sources: University of Washington except cave homes, Beifan.com, and Beijing suburb, Ian Patterson.

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated July 2015


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