Chinese property prices

[brett]

Hi guys,

I was talking to my lady about Chinese property prices today. She was telling me that houses (rather than apartments) are really expensive. She was quoting prices that seem incredible, even for a Westerner to afford. Is this right? Can only rich businessmen afford houses? I remember reading that in Hong Kong the ultimate status symbol was to own a lawnmower!

Also do most people rent apartments or do they buy?

I guess a good buying opportunity might arise in future though, if we get a W shaped recession in the West then Asia is in for a rude awakening :s.

I think I'd better put in for some overtime at work lol :icon_cheesygrin:.

[Irishman]

They are still in real estate bubble land there. However there are some unique factors at play :-

1) With the continued economic development there is still massive migration from the countryside to the cities leading to massive demand for housing there, thus there is a genuine reason for rising house prices even when speculation is taken into account...its a question of degree though
2) In the big cities that i've seen almost nobody lives in houses, everyone lives in apartments, so any houses with gardens are going to be incredibly expensive
3) There are few if any 100% loans, traditionally this means 20-30% deposit down and the loan is over a 15-20 years term so much bigger deposit needed compared to the west.
4) Upon death or 70 years the land reverts back to the government in some areas. Its also questionable whether high rise apartment blocks will last 70 years anyhow..stuff I saw in Guangzhou under 10 years old already looked 50+ years old to my eyes.
5) You cant "flip" apartments - you need to pay a mortgage for a minimum of two years in some of the larger cities.
6) Chinese people don't like to buy "second hand property", it maybe advisability to buy and leave unoccupied rather than get rent of the property

I'd be vary wary of buying Chinese property for these reasons. I would buy only new or recently completed apartments in up and coming areas with a view to selling them in the next 5-10 years.
I'd make sure to get advice from local expats and locals also about buying in the area first too, definitely dont take a developers spiel as written.

[heckerd]

Property prices in China is cheap compare to what you earn in the West.  You can buy an apartment easily for 100,000 USD in the bigger cities in China. A lot of Chinese people do buy "second hand property" only a small percentage want to by new. The reason most new apartments in china are empty is because its built like that. All you get is the flat without anything except plumbing for your bathroom and such.

[Chong]

We just brought our apartment in Kaiping ( 2 hours by bus south of Guangzhou / west of Shenzhen ). It's a three bedroom 2nd floor unit. The purchase price was 228,000 RMB + 39,000 RMB for a storage/mini garage = 267,000 RMB. It'll cost approx. 100,000 RMB to finish the interior so the final cost will be approx. 360,000 RMB or under $ 60,000 Canadian / $ 53,000 US. There are no monthly maintenance fees.

Kaiping is a city of 800,000 residents. In GZ/SH where the pop. is over 8 million, real estate will be much higher.

Kaiping residents are very finicky .....

1) There's a huge apartment complex next door to ours ... 10 buildings in total x 8 floors x 4-6 units per = approx. 320 units minimum. They only sold 45 units. Why Because the front main road floods when there's a heavy rainfall.

2) Another huge complex 10 minutes away from us with twice as many apartment buildings has sold pretty well. But Sunny's Mom didn't want us to buy there because the land used to be a cemetery. The apartments are about 85 % sold out .... but the houses are about 85 % unsold. A five bedroom townhouse will cost about $ 300,000 Canadian ... not cheap by Chinese standards. Each bedroom has it's own bathroom. As you guess, buyers will have multiple families live in those houses ... in-laws + siblings.

3) In Kaiping, the period of gov't redemption is after 60 years.

4) Many new apartment complexs sit empty [ though completed ] because the builder didn't get the gov't registration approval papers.

5) A real estate broker just open for business selling used apartments. A 10 year old three bedroom unit can be brought for 120,000 RMB. But like Irish wrote, it looks run down and older than it actually is. 90% of apartments [ new or old ] don't have elevators. Residents keep to themselves and don't care about the upkeep of the common areas. In newer complexes where there are elevators. landscapes and mini parks, there are maintenance fees of 200 RMB + per month.

6) Some residents will just buy a large garage space [ two car garage with a second floor space ] and convert it into a home or small business with living space.

7) Burglaries are a huge problem. Even if there are aluminum / steel window bars, thieves will find a way to pry it open.

[Ed W]

It's funny this topic comes up right now. My wife and I were discussing our plans for the future and so far our rough plan is to work for another 5 years, give or take, in the US and save up the total sum to buy a 60sq meter flat in Changchun. The prices are typically by the square meter and we're looking at something in the neighborhood of 6000 yuen per meter.

[brett]

Hmm, these prices aren't as bad as I'd feared. I think my lady is working on properties for billionaires. I guess there are plenty of those in China these days :icon_biggrin:.

I know Chinese properties look rundown pretty quickly - there were some very decrepid places in Hong Kong. I guess the heat and humidity isn't great for buildings.

[Chong]

I know Chinese properties look rundown pretty quickly - there were some very decrepid places in Hong Kong. I guess the heat and humidity isn't great for buildings.

It's the people who don't care. Nobody will put any money into the concrete stairwells / common areas. Garbage pick-up is right outside your door ... so you have odours on every floor. In each apartment, there's a sewer drain in the kitchen that everybody throw their gabage through. Sewage pipes have been known to burst. You even see the 'big' cockroaches on the stairs. Here's a friend who baked outside in front of the apartment where Sunny's Mom lives ... Martin ... Hungry ... BTW, he's bigger than he looks, that was a close-up shot. Here in Kaiping, people litter everywhere. there's no poop & scoop by-laws, streets are full of garbage ... there's absolutely no sense of mannerisms.

The newer buildings are becoming more like the Western Condos ... where people have to pay maintenance fees. The new generation is demanding cleaner & more modern living facilities. As the middle class become wealthy, they're demanding the finer things in life ... but the gap between the rich and poor is big.

[brett]

Thanks for the update Chong. Visiting my lady's apartment is going to be an interesting experience!

[Proteus]

I think Irish got almost everything except that land monopoly of government is also a major reason for high property price. It will keep rising because it's a main stream of fiscal revenue.

Here are official data of 10 cities with highest average property price(/ square meter) in 2009

1. Wenzhou 17116 (in RMB)
2. Shanghai 15404
3. Hangzhou 15277
4. Beijing 15051
5. Shenzhen 14758
6. Ningbo 10178
7. Guangzhou 9882
8. Sanya 9526
9. Dalian 8666
10. Xiamen 8519

Not so surprising with western standards but if I attach average annual income of Chinese people in 2009...
By the way, houses in cities are generally and publicly taken for granted as luxury for billionaires so don't bother to think of it if you don't dig out oil in your yard or accidentally write some software whose name starts with "windows" :fi_lone_ranger:

[David5o]

One of the reasons that properties 10 years old and above, look run down and decrepitated is that has only been fairly recently, that builders have had to build with recognised standard concrete grades. Before, they just threw any old rubbish into the concrete mix. As any Civil engineer here knows and will tell you, you use different grades of concrete depending on what and where your building. Failure to adhere to those grades of concrete, will dramatically affect the life of the structure.

Things are improving in China these days, As Chong pointed out, many Chinese insist on living in a clean and harmonious conditions, along with elevator and household disposal systems. They are more willing to pay maintenance/service fees to keep the building and areas in which they live, in a similar condition to when they purchased the property.

Developers are also building complexes now, that are very much security conscious, with controlled gated access, and many will have security patrols on a 24 hour basis, to fight the burglary problems. It seems to work, as the burglars are leaving these newer places pretty much alone, and targeting the magnitude of easier prey buildings that's around....


David....