Opinion

Felix Salmon

Chinese housing datapoint of the day

By Felix Salmon
September 23, 2009

Rosealea Yao reports:

Roughly 80 per cent of China’s urban residents own their homes – an astonishing number for a country that only began to privatise its housing stock in 1998.

Astonishing is right — and frankly, given the absence of any sourcing, I’m not sure I believe it. The high point of the influx from rural to urban China might be behind us, but it isn’t over yet, and all those poor Chinese workers looking to make their lives in the big city are unlikely to jump straight onto the bottom rung of the housing ladder. There might be some shenanigans going on with the definition of “residents” here — are all city inhabitants really included in the denominator?

That said, no visitor to China can fail to be astonished at the sheer quantity of housing stock which is going up in high rises across the country. If Yao is right, then substantially all of that stock is sold rather than rented, which helps to explain the astonishing amount of money in the Chinese construction industry. But it also means hundreds of billions of dollars of mortgages in the Chinese banking system, which I doubt were underwritten with particular assiduousness, and which have been written at extremely high price-to-income ratios. China could yet suffer a mortgage crisis of US proportions.

Comments
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My understanding (based on research into the real estate markets there and multiple trips for business and pleasure) is that 20-somethings, even the educated, live with their parents until they are ready to buy an apartment. It’s just part of the culture. That said, 20% of the market is still huge in absolute numbers of rentals.

 

When the czech republic privatized housing stock, people basically became owners of the home/apartment in which they were living, assuming there was no question of the pre-communism source of that home. In the case their was a question, someone still ended up with the home, but it may have not been the person living there at the time of privatization. Either way the entire stock went from state owned to individually owned very quickly resulting in a huge percentage of home ownership. I don’t know if china did the same thing, but if this is what happened, I would easily expect this large of a home ownership. I would also expect it to slip over the coming decades as the stock turns over.

Posted by libor | Report as abusive
 

I agree, all those workers living in dorms in the special economic areas building us iPods probably aren’t in the denominator.

Posted by Tiny Tim | Report as abusive
 

There are also a lot of corporate dormitories and group homes.

Posted by Eric M | Report as abusive
 

Felix,

since the mid 1990s, most of China’s public housing had been sold to residents. Rents were low and the government tried to get rid of the high maintanence cost.

Most property was sold well byond market price, in rural area you will hear stories that houses were given away for free.

This is why official statistics claim that four in five households are homeowners. Well, they might be, but upward mobility is limited, because new property in the cities is rather expensive.

And migrant works simply don’t count. They are officially living in town with their family while spending most of the year in the pearl river delta. They will not buy or rent a normal flat, but live a corporate facility. If there is no work, they have to move out and need to find shelter with the next employer.

Posted by Gregor/ Germany | Report as abusive
 

“Urban residents” means those with urban hukou (the all-important residence permit), about two-thirds of the population in large metropolises. The people owning houses haven’t moved into the city, they’re the privileged proletariat and intelligentsia from the pre-reform era, who bought their state-owned accommodation at uneconomic prices.

It’s also worth noting that ownership+rentals > 100%. Many of these people will rent the houses they own to others lower down the economic scale (like me) and rent their accommodation.

Mortgages are very rare in mainland China – people save up, encouraged by the fact that wages are often automatically put into a restricted account for housing purchases.

I’m less certain about this, but possibly another distinctive feature is that new housing stock is often pre-sold, as I believe is also the case in Hong Kong. The developer sells the units on in blocks, which are then split and sold on, then split and sold on, until they are owned by individual families. The risk is spread very widely.

Posted by SeekTruthFromFacts | Report as abusive
 

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