China home prices soar

[rogerluli]

The economy is booming in China however many of the young in China are finding it difficult to have a roof over their heads. Price of home have soared where it now takes 60-70% of a person income just meet their mortgage payment. The bubble is growing and when it pops there is going to trouble in China.

 

http://www.washingtonpost.com/wp-dyn/conte...0021700265.html

 

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

Somebody forgot to tell the banks that then.

 

While in rural a third-tier cities cash is king, the majority of homes sold in Beijing, Shanghai and Guangzhou are with conventional mortgages.

 

 

Got any evidence of that?

 

Common knowledge if you follow the property market... We have made tremendous gains on our Hainan properties since the central government announced their intent of making Hainan into a world-class vacation spot...China's Hawaii... From what we hear these are all cash buyers from the north desperate for some nice weather... B)

[rogerluli]

If you really need to sit around worrying about the real estate bubble and /or the entire economy bubble in China here's some reading to get you going... B)

 

http://chovanec.wordpress.com/2010/01/30/r...na-real-estate/

 

http://www.scribd.com/doc/26781802/China-T...liy-Katsenelson

 

http://www.forbes.com/2010/02/11/china-bub...l?feed=rss_home

 

http://www.chinalawblog.com/2010/01/china_...e_bubble_w.html

 

enjoy...

[timb]

Thanks for the links Roger.

 

If those don't scare you enough, you can always read and watch the video's here.

Chris Martinson - Crash Course

 

 

 

If you really need to sit around worrying about the real estate bubble and /or the entire economy bubble in China here's some reading to get you going... B)

 

http://chovanec.wordpress.com/2010/01/30/r...na-real-estate/

 

http://www.scribd.com/doc/26781802/China-T...liy-Katsenelson

 

http://www.forbes.com/2010/02/11/china-bub...l?feed=rss_home

 

http://www.chinalawblog.com/2010/01/china_...e_bubble_w.html

 

enjoy...

[a2784]

If you really need to sit around worrying about the real estate bubble and /or the entire economy bubble in China here's some reading to get you going...

 

http://chovanec.wordpress.com/2010/01/30/r...na-real-estate/

 

http://www.scribd.com/doc/26781802/China-T...liy-Katsenelson

 

http://www.forbes.com/2010/02/11/china-bub...l?feed=rss_home

 

http://www.chinalawblog.com/2010/01/china_...e_bubble_w.html

 

enjoy...

Good links although the 4th one links back to the 1st one ..

 

Just to keep perspective here is another link from Forbes with a different opinion ... (they are really like arseholes)

 

http://www.forbes.com/2010/02/03/china-eco...latedstoriesbox

 

I have heard the arguement that China's growth numbers are illusions and/or lies. This links discusses that issue.

[david_dawei]

I'm not going to look at links for now... but all the cities named are the top cities of china; The majority of china is not at these cities.

 

So, maybe money is available only if you live in a big or developed city? would be better to show what percent of china dwell there.

[ShaQuaNew]

I'm not going to look at links for now... but all the cities named are the top cities of china; The majority of china is not at these cities.

 

So, maybe money is available only if you live in a big or developed city? would be better to show what percent of china dwell there.

 

Good point David. There are certainly a lot more young people opting to get a mortgage in the larger Chinese cities. These groups are comprised of professionals with a good stable income. Homes are a lot more expensive today in these big cities, so from all appearances many are opting to get it now, and pay later so they can have nicer amenities like appliances, furniture, and electronics. Ever hear of anyone getting caught in well-baited traps like that?

 

Rural China still constitutes the majority of the population, even while the west continues to believe the only important cities are the big ones.

[a2784]

I'm not going to look at links for now... but all the cities named are the top cities of china; The majority of china is not at these cities.

 

So, maybe money is available only if you live in a big or developed city? would be better to show what percent of china dwell there.

David your 80% right. Qingdao is the only one of the five that is not a Tier 1 city (it is Tier 2).

 

My experience is that people get loans in the 5 cities meantioned (only because I know chinese people in those cities who have loans). What percentage have loans is a totally different answer and I looked briefly for this type of info. but could not find anything.

 

Just for fun using same source:

 

As for the population (2009):

Beijing: 17.6MM

Shanghai: 19.2MM

Guangzhou: 10.2MM (2008)

Shenzhen: 8.6MM (2007)

Qingdao: 7.6MM (2007)

Percent of China: 63.2MM / 1400 MM = 4.5%

[Tony_onrock]

T

 

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

This is actually not true. 80% get mortgages and only about 20% pay cash. The claim that young people are finding it hard to have roof over their head is also not true.

Although housing prices have gone up quite a bit, rental has not. The rental return is about 3-4% in most cities and as low as 2% in cities with high housing prices. People can rent.

[ShaQuaNew]

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

This is actually not true. 80% get mortgages and only about 20% pay cash. The claim that young people are finding it hard to have roof over their head is also not true.

Although housing prices have gone up quite a bit, rental has not. The rental return is about 3-4% in most cities and as low as 2% in cities with high housing prices. People can rent.

 

It can be real comedy here sometimes as to where people are getting their figures when they make statements. I would consider it very likely that many Chinese young, and real estate investors are opting to go the mortgage route, in lieu of years past where predominately cash was paid in full. It would be very difficult to validate any figures, as I don't know that they are published in China.

 

That culture of remaining debt free is alive and well. There are dangers in financing a home in China. Many of my co-workers have opted to get a loan, and had to come up with the standard 50% of the total value when submitting the application to the bank. The danger here is, that if you don't get approved, and it does happen, that you lose that 50% down fee. Therefore, unless you have a very stable income and history, it is still safer to pay the total in cash.

 

Also, don't forget that most Chinese live in rural areas where everything is different.

Edited February 24, 2010 by ShaQuaNew (see edit history)

[b.c]

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

This is actually not true. 80% get mortgages and only about 20% pay cash. The claim that young people are finding it hard to have roof over their head is also not true.

Although housing prices have gone up quite a bit, rental has not. The rental return is about 3-4% in most cities and as low as 2% in cities with high housing prices. People can rent.

 

It can be real comedy here sometimes as to where people are getting their figures when they make statements. I would consider it very likely that many Chinese young, and real estate investors are opting to go the mortgage route, in lieu of years past where predominately cash was paid in full. It would be very difficult to validate any figures, as I don't know that they are published in China.

 

That culture of remaining debt free is alive and well. There are dangers in financing a home in China. Many of my co-workers have opted to get a loan, and had to come up with the standard 50% of the total value when submitting the application to the bank. The danger here is, that if you don't get approved, and it does happen, that you lose that 50% down fee. Therefore, unless you have a very stable income and history, it is still safer to pay the total in cash.

 

Also, don't forget that most Chinese live in rural areas where everything is different.

 

FWIW, I know of a couple families in my wife's hometown about 40 miles west of chengdu that recently bought apartments with 30% and mortgaged the rest. It is in the earthquake stricken region and I wonder if that has anything to do with it because there is a lot of developments and buildings going up within the past year. And I do know some of it is coming from government funds...particularly a lot of resorts at the hot springs area and the base of the himalayas.

[b.c]

T

 

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

This is actually not true. 80% get mortgages and only about 20% pay cash. The claim that young people are finding it hard to have roof over their head is also not true.

Although housing prices have gone up quite a bit, rental has not. The rental return is about 3-4% in most cities and as low as 2% in cities with high housing prices. People can rent.

 

Out of curiosity I do look at housing prices as well as rental rates in a few areas in China. And I have noticed that the rental rates are extremely low compared to values. You are probably spot on with the return figures you mentioned. But what I cannot figure out is why. Is this simply a supply/demand equilibrium situation? And if so, would that not suggest an extremely scary amount of speculation in the real estate market, even more so than perhaps even some 'china real-estate bubble alarmists' believe?

 

What say you?

[GDBILL]

The economy is booming in China however many of the young in China are finding it difficult to have a roof over their heads. Price of home have soared where it now takes 60-70% of a person income just meet their mortgage payment. The bubble is growing and when it pops there is going to trouble in China.

 

http://www.washingtonpost.com/wp-dyn/conte...0021700265.html

 

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

Somebody forgot to tell the banks that then.

 

While in rural a third-tier cities cash is king, the majority of homes sold in Beijing, Shanghai and Guangzhou are with conventional mortgages.

 

 

Got any evidence of that?

 

 

Rudimentary math skills would help, but you can try calling (020) 3888-0899. It's ICBC Private Banking and they are running a very brisk mortgage operation. They seem to think the overwhelming majority of their customers (who have significantly high assets) go through mortgages -- especially for their first property since there is an interest rate break for first-time home buyers.

 

ICBC mortgage department for those not in the Private Banking category also opt overwhelmingly for mortgages on their first home. (020) 8758-5901. Their concern now is that the People's Bank is going to tighten the money supply and this time, unlike in previous times, they will specify also a tightening of funds available for mortgages -- both commercial and individual.

 

Again, this is just in the top tier cities. In those areas where mud huts cost 100k RMB, probably most people use cash.

[GDBILL]

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

This is actually not true. 80% get mortgages and only about 20% pay cash. The claim that young people are finding it hard to have roof over their head is also not true.

Although housing prices have gone up quite a bit, rental has not. The rental return is about 3-4% in most cities and as low as 2% in cities with high housing prices. People can rent.

 

It can be real comedy here sometimes as to where people are getting their figures when they make statements. I would consider it very likely that many Chinese young, and real estate investors are opting to go the mortgage route, in lieu of years past where predominately cash was paid in full. It would be very difficult to validate any figures, as I don't know that they are published in China.

 

That culture of remaining debt free is alive and well. There are dangers in financing a home in China. Many of my co-workers have opted to get a loan, and had to come up with the standard 50% of the total value when submitting the application to the bank. The danger here is, that if you don't get approved, and it does happen, that you lose that 50% down fee. Therefore, unless you have a very stable income and history, it is still safer to pay the total in cash.

Also, don't forget that most Chinese live in rural areas where everything is different.

 

Simply false.

 

For first time home buyers 30% is the most you need to put down on a new home. For used homes it can be as low as 40% depending on the appraisal value and age of the property. Tops -- absolute tops -- is 50%.

 

When purchasing a home from a developer, the standard down payment is 20% and there is a standard clause that the purchase agreement is contingent on bank approval. If the bank does not approve the mortgage, you get your money back, period. Once the mortgage is approved, you come up with the other 10% remaining. Many times you can even do it 10 + 20.

 

When purchasing a used home, you'd be really stupid to give the current owner anything other than a minimal deposit while going through the mortgage formalities. You could use an escrow service provided by real estate agents, but that is probably even riskier.

 

Even for expats, getting a mortgage in China is one of the least stressful banking experiences you'll have. It is nothing at all like the mortgage circus you go through when buying a home in the States. If you have an income sufficient -- according to bank calculations -- to safely pay the mortgage and you have no adverse credit history, your mortgage is approved. Generally the bank wants verification that you earn approximately double your mortgage payment. It really is that easy.

 

That your friends have had problems says more about the quality of your friends than how the mortgage process works.

[GDBILL]

Out of curiosity I do look at housing prices as well as rental rates in a few areas in China. And I have noticed that the rental rates are extremely low compared to values. You are probably spot on with the return figures you mentioned. But what I cannot figure out is why. Is this simply a supply/demand equilibrium situation? And if so, would that not suggest an extremely scary amount of speculation in the real estate market, even more so than perhaps even some 'china real-estate bubble alarmists' believe?

 

What say you?

 

Your observation is correct. A lot of it is due to low occupancy rates that many Chinese people say hovers around 60% to 70%. It's also due to the fact that people simply cannot afford or do not want to pay what you'd expect rent would be. They'd rather buy the place.

 

Two current examples:

 

One of the most popular residential areas in Guangzhou where you can buy a new house for about 13k RMB per square meter -- 130 square meter flats rent on average for 3,500 RMB.

 

In Beijing, on the 2nd Ring Road, one of the most desireable residential areas has homes for sale at about 25k RMB per square meter. Last year, when property prices were strong, a 200 m2 flat was renting for about 10k. From about the last 4 months until even now 7,500 RMB per month is fine. 130 m2 flats are renting at about about 5k.

 

Would you buy a 4 - 5 million RMB flat to rent out at 7,500 RMB per month? 15% or more of that 7,500 RMB is automatically eaten up in taxes when you provide a rental receipt (fa piao) to the tenant.

[a2784]

Most Chinese people don't get mortgages. They pay cash for the complete price of their home. This includes young and old alike.

 

This is actually not true. 80% get mortgages and only about 20% pay cash. The claim that young people are finding it hard to have roof over their head is also not true.

Although housing prices have gone up quite a bit, rental has not. The rental return is about 3-4% in most cities and as low as 2% in cities with high housing prices. People can rent.

 

It can be real comedy here sometimes as to where people are getting their figures when they make statements. I would consider it very likely that many Chinese young, and real estate investors are opting to go the mortgage route, in lieu of years past where predominately cash was paid in full. It would be very difficult to validate any figures, as I don't know that they are published in China.

 

That culture of remaining debt free is alive and well. There are dangers in financing a home in China. Many of my co-workers have opted to get a loan, and had to come up with the standard 50% of the total value when submitting the application to the bank. The danger here is, that if you don't get approved, and it does happen, that you lose that 50% down fee. Therefore, unless you have a very stable income and history, it is still safer to pay the total in cash.

Also, don't forget that most Chinese live in rural areas where everything is different.

 

Simply false.

 

For first time home buyers 30% is the most you need to put down on a new home. For used homes it can be as low as 40% depending on the appraisal value and age of the property. Tops -- absolute tops -- is 50%.

 

When purchasing a home from a developer, the standard down payment is 20% and there is a standard clause that the purchase agreement is contingent on bank approval. If the bank does not approve the mortgage, you get your money back, period. Once the mortgage is approved, you come up with the other 10% remaining. Many times you can even do it 10 + 20.

 

When purchasing a used home, you'd be really stupid to give the current owner anything other than a minimal deposit while going through the mortgage formalities. You could use an escrow service provided by real estate agents, but that is probably even riskier.

 

Even for expats, getting a mortgage in China is one of the least stressful banking experiences you'll have. It is nothing at all like the mortgage circus you go through when buying a home in the States. If you have an income sufficient -- according to bank calculations -- to safely pay the mortgage and you have no adverse credit history, your mortgage is approved. Generally the bank wants verification that you earn approximately double your mortgage payment. It really is that easy.

 

That your friends have had problems says more about the quality of your friends than how the mortgage process works.

I seem to recall that before the housing bubble and crisis getting a mortgage was quite a breeze for people in the US even if they did not have sufficient income and bad credit.

 

It will probaby be tougher to get a China property mortgage in future if (when) the bubble bursts.