Some times I feel that HN is a real estate forum. People, why are you so crazed about housing? :)
I have following thing to say about real estate in China as a person who's been going in and out of China for last 12 years: conventional supply and demand economics fail to rationally explain the market, alike many other things in the country.
There are big cities with really constrained supply, not unlike California, and still having low rents, and there is Shanghai, with new suburbs and microdistricts popping up every year, but still having highest rent in China despite high vacancy rate even in the city centre.
Housing in China is also a very emotionally charged topic. A lot of status connotation is attached to it, and there is peer pressure like "no wife for you without a house."
Most Chinese I meet can't conceal their bemusement when they see foreigners being so unconcerned with housing issue. These people don't know that in most of the world, renting an apartment, and moreover luxury one, is more expensive than paying for mortgage, and are utterly shocked when I show them the digits. Chinese don't realise just how blessed they are with low rents.
And yes, there are still Chinese out there who are shocked discovering that "most Americans are still living in wooden houses," and that ones who live there tend to be richer than ones buying highrise apartments.
Beijing isn’t as hot as Shanghai real estate wise, but I could never get my head around how an apartment that would sell for a million dollars would rent out for just 10k RMB/month. Why would anyone even bother buying with such lousy rent to sale ratios?
Anyways, I saved a lot on rent during my 9 years in China.
Why would anyone even bother buying with such lousy rent to sale ratios?
You weren't a tenant. You were a placeholder.
Your function was to pay enough money for the owner to pay the property taxes and maintenance until the value of the home rose to a level where it was worth selling.
I live in such a place. The Chinese woman who owns my house is just waiting for the market to reach the right price point where she can sell.
In the meantime, my function as a renter is to keep the place clean and safe and do basic maintenance. That's not what's spelled out on the lease, but at an abstracted level, I know that's what I am to her.
I heard the market for buying is different than many other places because of the social pressure to own - when a man marries for example they often need to have a house, or else it could put the marriage in jeopardy, in effect increasing the value of the property beyond the value of a place to live; extended families are willing to pile on to help a young person afford that house, so owners know they can overcharge for their properties. But idk how true that is/how much it explains the crazy divide between rent and sale prices.
>Why would anyone even bother buying with such lousy rent to sale ratios?
Speculation. Prices have been going up at crazy rates for years. Something like 10% a year isn't uncommon. Millions of people got rich just buying and selling few years later.
That, and the necessity to buy before marriage that forces people to stop renting.
I don't envy them. Some people spend up to 70% of their income into 30 year mortgages, based on pure conviction that housing prices will always go up.
> most Americans are still living in wooden houses
that is pretty much an American thing, e.g. in Sydney, people don't buy wooden match boxes, they prefer double brick federation home or californian bungalow.
Conventional supply and demand economics perfectly explains both of these situations. SF has a massive under supply of housing, and restrictive zoning rules that prevent supply from increasing. China centrally funds huge amounts of developments, and many of those developments aren’t met with massive demand, so they end up with a lot of real estate that they struggle to give away in some situations.
Throw into the mix the fact that San Francisco wages are approximately 10x Chongqing wages with land at a premium as a result, and so even without zoning restrictions in SF you'd expect new development there to be expensive (and similarly even without government-subsidised overbuilding in Chinese second tier cities you'd expect rental costs to be lower than most Western cities)
I have following thing to say about real estate in China as a person who's been going in and out of China for last 12 years: conventional supply and demand economics fail to rationally explain the market, alike many other things in the country.
There are big cities with really constrained supply, not unlike California, and still having low rents, and there is Shanghai, with new suburbs and microdistricts popping up every year, but still having highest rent in China despite high vacancy rate even in the city centre.
Housing in China is also a very emotionally charged topic. A lot of status connotation is attached to it, and there is peer pressure like "no wife for you without a house."
Most Chinese I meet can't conceal their bemusement when they see foreigners being so unconcerned with housing issue. These people don't know that in most of the world, renting an apartment, and moreover luxury one, is more expensive than paying for mortgage, and are utterly shocked when I show them the digits. Chinese don't realise just how blessed they are with low rents.
And yes, there are still Chinese out there who are shocked discovering that "most Americans are still living in wooden houses," and that ones who live there tend to be richer than ones buying highrise apartments.