Home ownership an unobtainable dream in China

Home ownership an unobtainable dream in China

CNN
November 5, 2013, 12:20 am TWN

CNN–Cui Shufeng is a retired government worker in Beijing. She is one of the lucky homeowners who bought her place long before the housing sector galloped out of reach for the average Chinese salary worker. “It is ridiculously high,” she says pointing to apartments in her neighborhood. “These homes near the school here are CNY 70,000 (US$11,400) per square meter. It’s not even worth CNY 7000 (US$ 1140) per square meter because it’s not even good quality.”Her concern is on the radar of the central leadership that is expected to discuss economic reforms at the plenary session starting Nov. 9. For Chinese leaders, the property sector is an emotional and political hot potato. The dream to own a home is a far reach for tens of millions of Chinese citizens.

In the latest housing data, new home prices for September rose at its fastest pace in almost three years. In Beijing, new home prices were up 16 percent, Shanghai 17 percent and Shenzhen 20 percent from a year earlier.

“The problem is Chinese people have very few investment vehicles. They’ve lost trust in the stock market so they turn to real estate,” says Xu Si Tao, China Director of the Economist Intelligence Unit.

Xu says the central leadership needs to make bold steps in financial reforms to give citizens more options to invest their money.

One measure China is considering is to allow banks to set their own interest rates, creating more competition.

I was in Beijing last week and visited a luxury villa compound. It was a large site with tens of dozens of completed but mostly empty villas. A worker in the sales office told me the average home was priced at CNY 23 million (US$3.8 million) and most were sold. He said half were owner-occupied (though I saw very little sign of residents) and the other half purchased as investments.

I was told the supermarket in the center of the compound was open and often used by residents. It was clearly still under construction. When I pointed this out, I was then told the grand opening would be next year. Message: The bubble is alive and growing. These villas are a pretty — and by most appearances, empty — place to park money.

Mrs. Cui shakes her head at the dilemma facing the government. She doesn’t believe recent curbs will work like a ban on third home loans in Shanghai.

“I don’t think home prices will drop sharply because our economy is still doing okay,” she says. “Our child bought a home in the U.S. recently. The price was about the same as a flat in Beijing, but the area is a lot bigger and the quality is much better!”

Pauline Chiou is a CNN anchor/correspondent and the co-host of “World Business Today” based in Hong Kong. Follow Pauline on Twitter @PaulineCNN. For more business coverage, go to www.cnn.com/business.