Very High Home Price

[Stone]

I was reading this article which says the average unit price for new apartments within the Fifth Ring of Beijing is RMB 17,000/M2. The average size of the new apartment sold is 113 M2 (or 1,216 square feet). Thus the average sale price of a new apartment in Beijing within the Fifth Ring is RMB 1,921,000 (or US$281,000). The article continues to say the average annual before tax family income in Beijing is about RMB 113,000 (US$16,500).

 

If the average family is making $16,500 a year and has to support a $281K apartment, the home price/income ratio is 17 times, way too high. I think you can buy a nice house of 1,216 square feet for $281K in many parts of the United States. No wonder many Chinese tourists say U.S housing is cheap.

[GZBILL]

I was reading this article which says the average unit price for new apartments within the Fifth Ring of Beijing is RMB 17,000/M2. The average size of the new apartment sold is 113 M2 (or 1,216 square feet). Thus the average sale price of a new apartment in Beijing within the Fifth Ring is RMB 1,921,000 (or US$281,000). The article continues to say the average annual before tax family income in Beijing is about RMB 113,000 (US$16,500).

 

If the average family is making $16,500 a year and has to support a $281K apartment, the home price/income ratio is 17 times, way too high. I think you can buy a nice house of 1,216 square feet for $281K in many parts of the United States. No wonder many Chinese tourists say U.S housing is cheap.

 

Those figures seem a bit off.

 

First, the median salary in Beijing is something like 3,000 RMB. That's about 84k RMB Gross for a family with both parents working.

 

Second, the average price of a new apartment on the inside boundary of the Fifth Ring Road isn't RMB 17k / m2. While there may be a few complexes that are priced that high, it is the exception rather than the rule. In Chaoyang District on the boundary of the Second Ring Road prices in the most expensive sectors (San Li Tun, Embassy District) new units are averaging about RMB 18k. Some of the better and most desireable older units (i.e. near the best schools in Chaoyang) are asking for about 21k, but you can get them to lower the price by 15% if you are a skillful negotiator.

 

Still, there does appear to be a wide disparity. Even at 15k / m2 for an 80 m2 apartment, the cost is equal to over 14 years gross family income. But if you factor in not having to pay property taxes every year, it brings it down to about 9.5 years. That's a lot better than what people in LA or NYC get stuck with.

[Stone]

Still, there does appear to be a wide disparity. Even at 15k / m2 for an 80 m2 apartment, the cost is equal to over 14 years gross family income. But if you factor in not having to pay property taxes every year, it brings it down to about 9.5 years. That's a lot better than what people in LA or NYC get stuck with.

Bill, you may be right. The figures that I got are from a large real estate broker in Beijing. But, remember the Fifth Ring in Beijing is so far away from downtown BJ, it is probably comparable in distance to some suburb in NJ to downtown NYC. Talking about saving 9.5 years of gross salaries without paying taxes, without eating, clothing, healthcare, shelter, etc is still way beyond imagination. If the apartment averages RMB 1.2 million, then if you take a 30 year mortgage, then you could pay well over RMB 2 million in total.

[milan08]

I went back to visit family this summer. While I was there, my friends all asked me about the economy situation of America. They told me that China's economy is affected by the recession of America too. But what makes it hard to believe is the house price. It is soaring to the sky. I passed by couple of construction areas where they all have the big commericals of : 20,000/sq, on top of that, a lot of agents will hold back their houses, believing the price will go up soon.....

 

Though with the high price, most people in Beijing have their own house. Dont forget, Beijing is the one of the top four most expensive cities in the world with people making the highest salaries. A lot of my colleagues have at least two or three houses, comparing to them, I have fallen much behind.

[weiaijiayou]

not disputing the astronomical nature of the figures, a lot of the younger men i know have gotten huge amounts of help from their parents in making gigantic down payments on apartments. he and the wife will work on paying off the place and the parents will later sell their house and move in with them.

[2mike&jin]

I was reading this article which says the average unit price for new apartments within the Fifth Ring of Beijing is RMB 17,000/M2. The average size of the new apartment sold is 113 M2 (or 1,216 square feet). Thus the average sale price of a new apartment in Beijing within the Fifth Ring is RMB 1,921,000 (or US$281,000). The article continues to say the average annual before tax family income in Beijing is about RMB 113,000 (US$16,500).

 

If the average family is making $16,500 a year and has to support a $281K apartment, the home price/income ratio is 17 times, way too high. I think you can buy a nice house of 1,216 square feet for $281K in many parts of the United States. No wonder many Chinese tourists say U.S housing is cheap.

 

 

Yea, this is about right for Xiamen as well - I just returned Tuesday - and while there I checked...almost all the newer places - inside the city proper were 18-20K RMB (M2). Puts the average place in the $2M RMB range - of course let's not forget that it has "NOTHING" inside of it...no floors, sinks, bathrooms, lights...it is a SHELL.

 

My Jin had bought her place in Xiamen - 2 years before I met her - and took delivery about 6 months after we met. The place she paid the $2M RMB for had no floors, sinks, bathrooms, AC, doors, some windows, etc...it was a SHELL. SHe also had to pay for it prior to it being built -- i.e. she gave them the $2M RMB 2.5 years before they gave her the keys. Lucky I was there to help build it out...that was another $800k RMB (albeit it is mostly western style - or as much as I could get done that way).

 

The house has continued to escalate in price, albeit not wildly - but still up 10-15%. What has gone wild is the parking spot she separately bought. I chastized her for buying it prior to the building being ready...as she tied up $18K USD for the parking spot in the adjacent building (linked underground to her new building). She didn't need the parking spot till she moved in..but tied up the money. Her answer was...it always goes up...why wait? Today (3 years later) the parking spots are selling for over $65K USD -- if you can get one! I guess I just didn't understand.

 

ALthough I haven't checked, I would be interested in knowing what ShenZhen, Shanghai, and Hong Kong markets are doing...that would round out the barometer of Chinese real estate.

 

I still don't understand the Chinese and the buying. They seem to be just like Americans - everyone wants a home, car, and a Louis Vitton handbag! (BTW - the handbags in China were 3.5X more expensive than here in "Cheap Hawaii")

[Bill and Linda]

Thank goodness for the sensible prices in Chengdu. 5,600rmb per sq m for our extremely nice new apartment, inside the 2nd ring, built by Vanke, great park in the complex with an incredible swimming pool, parking underground for 250rmb per month. Western-style "decoration", complete with all new furniture and appliances, for 90k rmb.

[Mike and Yan]

Thank goodness for the sensible prices in Chengdu. 5,600rmb per sq m for our extremely nice new apartment, inside the 2nd ring, built by Vanke, great park in the complex with an incredible swimming pool, parking underground for 250rmb per month. Western-style "decoration", complete with all new furniture and appliances, for 90k rmb. B)

 

Would that be comparable to Kunming? or Nanning?

 

ummmm do they still have earthquakes there in Chengdu?

[Bill and Linda]

ummmm do they still have earthquakes there in Chengdu?

 

only every now and then ..... but, seriously, the Wenshuan quake last year did almost no damage to Chengdu. I was shaken by it, but not to the point of being paranoid afterward. A few weeks ago I was lying in bed and thought I noticed a very small tremor, so I checked the USGS web site and, sure enough, there had been one detected about 80km to the north. We are a sufficient distance from the fault line that I'm not going to lose any sleep over it.

[GZBILL]

Still, there does appear to be a wide disparity. Even at 15k / m2 for an 80 m2 apartment, the cost is equal to over 14 years gross family income. But if you factor in not having to pay property taxes every year, it brings it down to about 9.5 years. That's a lot better than what people in LA or NYC get stuck with.

Bill, you may be right. The figures that I got are from a large real estate broker in Beijing. But, remember the Fifth Ring in Beijing is so far away from downtown BJ, it is probably comparable in distance to some suburb in NJ to downtown NYC. Talking about saving 9.5 years of gross salaries without paying taxes, without eating, clothing, healthcare, shelter, etc is still way beyond imagination. If the apartment averages RMB 1.2 million, then if you take a 30 year mortgage, then you could pay well over RMB 2 million in total.

 

Yes, life here for the average soul is not easy. That's why they rely on public transportation that is dirt cheap or else ride a bicycle. Food here is also very inexpensive as is clothing. Probably as a percentage of income, housing takes up the lion's share.

 

The good news is that contrary to all the garbage you hear from real estate "experts," property prices and rental costs are dropping significantly. Most housing units sold over the past several years were investment units. Now, however, occupancy rates are very low so that means it's a tenants market right now. And even in the best of times, rent prices alone were never high enough to justify buying a unit as investment.

 

Another poster mentioned parking spaces. Many people have gotten burned badly on parking spaces. In many of the major cities people spent almost as much on buying a parking space as they have on buying their apartment with the hopes of turning a decent profit later when spaces became scarce. Most of these people got FITA when the city governments enacted rules placing a strict cap on parking space prices and rentals. Now, in Beijing and Guangzhou, there is a monthly rental cap of 400 RMB on a residential parking space. Office space can be had for 600 RMB per month. Heck, you can even get a permanent public parking space for 500 RMB per month.

 

Another thing about buying your own parking space in the building you live in is that you cannot keep that space forever. The old law provided you can keep your housing unit for up to 70 years, but that was recently changed and you can keep it forever. Parking spaces were not included in the new legislation and you can currently only keep a parking space for something like 15 - 20 years before it reverts back to the government. While they won't take it away from you, you'll have to fork over more money what that time comes if you plan on keeping it.

[2mike&jin]

Another thing about buying your own parking space in the building you live in is that you cannot keep that space forever. The old law provided you can keep your housing unit for up to 70 years, but that was recently changed and you can keep it forever. Parking spaces were not included in the new legislation and you can currently only keep a parking space for something like 15 - 20 years before it reverts back to the government. While they won't take it away from you, you'll have to fork over more money what that time comes if you plan on keeping it.

 

 

I think our parking space deed has 70 years on it as well as the house, as I remember, but yes as you pointed out it was not excluded in the recent lift of this restriction. Buyer beware.

 

I think, if Jin's feelings about CHina and the US stay like they are now - we won't be owning the house/parking spot/or Car in CHina for very long. She was delighted in coming home to the US from our recent trip, and has informed me that we "no longer need" to return to China - or at least not very often. I guess I will continue to monitor and see if the feelings are the same over the coming years.

Edited August 23, 2009 by 2mike&jin (see edit history)

[Tony_onrock]

Well, really depends on the location and quality of the building. In Chengdu, 6000 sm is probably the average. We are pushing out our development there starting at 8500/sm. In Guangzhou, our development is selling for 25,000/sm and almost sold out, prime location stand alone villa. In Beijing, in a location that Bill described we are negotiating on a complex and probably resell at 30,000/sm. Tanchengyipin, the highest priced apartment in Pudong Shanghai is selling pretty well at closing to 100,000 sm and in Puxi, in Xintiandi, where we sold our building at 61,000 sm beginning 2008 is now selling at over 70,000 sm. Rental, though, have fallen significantly for luxury apartments due to over supply and lack of tenants. Our project in Changzhou is selling at 5500 and Xuzhou a bit shy of 4000. So the price range is quite big.

Commercial and office is hurting big time though.

[GZBILL]

I think our parking space deed has 70 years on it as well as the house, as I remember, but yes as you pointed out it was not excluded in the recent lift of this restriction. Buyer beware.

 

I think, if Jin's feelings about CHina and the US stay like they are now - we won't be owning the house/parking spot/or Car in CHina for very long. She was delighted in coming home to the US from our recent trip, and has informed me that we "no longer need" to return to China - or at least not very often. I guess I will continue to monitor and see if the feelings are the same over the coming years.

 

You might want to check carefully because according to the central government is not possible to get a 70-year term on a parking space.

Edited August 31, 2009 by GZBILL (see edit history)

[GZBILL]

Well, really depends on the location and quality of the building. In Chengdu, 6000 sm is probably the average. We are pushing out our development there starting at 8500/sm. In Guangzhou, our development is selling for 25,000/sm and almost sold out, prime location stand alone villa. In Beijing, in a location that Bill described we are negotiating on a complex and probably resell at 30,000/sm. Tanchengyipin, the highest priced apartment in Pudong Shanghai is selling pretty well at closing to 100,000 sm and in Puxi, in Xintiandi, where we sold our building at 61,000 sm beginning 2008 is now selling at over 70,000 sm. Rental, though, have fallen significantly for luxury apartments due to over supply and lack of tenants. Our project in Changzhou is selling at 5500 and Xuzhou a bit shy of 4000. So the price range is quite big.

Commercial and office is hurting big time though.

 

You might want to check again on Tan Chen Yi Pin. As of approximately 3 weeks ago they have sold -- after several years on the market -- only two units.

 

So while the asking price may be 100k RMB / m2, it is certainly not selling at that price. Perhaps it could be because, although the location is excellent, the construction quality and design is your typical China substandard?

[Tony_onrock]

http://www.ljzlib.com/html/main_lx1_conten...&wz_id=2677

 

please see the attached link, as of July 17, 2009, a total of 22 units were sold and the average price is 100k/sm at Tangchenyipin.

 

Quality wise, I have not visited the project and thus can not comment on it. As far as the units we put on the market, the quality is no less than those build in the U.S. For instance, our hotel, Hotel G in Beijing, was designed by award winning architect from London and Shama Lux in Shanghai was designed by Philipo, who won the best designer award for 2007. He is an Italian. All of our project team head had experience working in the west. We did a few projects also in the US that we are proud of, including the Hollywood Roosevelt Hotel, which is one of the hippest hotels in the U.S. There are all kinds of developers in China. But there are quite a few good ones, with good quality.