It is an understatement to say that apartments are expensive in China. Look at how a $300,000 apartment in Xiamen compares with residential properties of the same price around the world.
For $300,000 you could buy a five bedroom, 2 bathroom, two-family home in Dorchester, just outside of Boston. Or, for $300,000 you could land a 3,670 square foot, two-story, Texas-style mini-mansion in Rowlett, Texas. Or, if living in a big city is more your style, you could purchase a studio apartment in midtown Manhattan for a little over $300,000. Don’t want to live in the USA? For the equivalent of three hundred thousand US dollars you could be the owner of a two story house that’s a part of a renovated monastery in Fivizzano, Tuscany or a two bedroom apartment in a resort community on the French Riviera.
Or, if you want to live in Xiamen, China, for $300,000 you could get this:
This is the apartment that I rent in the Ruijing part of Xiamen. It’s a two bedroom, 82 square meter shit hole on the first floor of a 15 year old building. It’s location isn’t bad, but in no way could it be considered downtown. When I was going through the proceedings to rent the place I found out that the owner was trying to sell it, so I casually asked the real estate agent how much it was on the market for:
$284,000. Nearly 1,800,000 RMB. That’s 22,000 RMB per square meter or $1,055 per square foot.
Though not as expensive as in Beijing or Shanghai, real estate in Xiamen does tend to be more costly than in many other parts of China, but the trend is the same everywhere:
Housing in China is ridiculously expensive.
This is a country were $5 buys you two armfuls of food from the market, a full meal in a restaurant can be had for $3.50, a bunk on a train ticket for a 2,000 kilometer journey costs $70. Add to this the fact that the minimum wage in Xiamen is 1,200 RMB (less than $200) per month, the average wage is under 6,000 RMB (under $1,000) per month, and what’s considered a middle class wage in China is roughly between $1,200 and $5,000 per month, and it becomes evident just how out of proportion the price of property in China truly is.
Over the past 30 years 600 million Chinese people rose out of poverty, and there are now over 300 million people in this country that are considered middle class. Much has been said about how large masses of people in China have grown richer very rapidly, but it seems as if the more money people here earn the more they are gouged by profiteers, a restrictive economic system, a culture where demonstrating status is an expensive necessity, as well as some very unbending traditions that often take precedence over financial common sense or prudence.
In opposition to the cost of buying property, renting apartments in China is relatively cheap. I rent the two bedroom apartment featured in this article for around $400 per month, and that’s pretty expensive when compared with the cost of renting around the country. I’ve previously rented two bedroom apartments in Hangzhou for around $150 per month, and, generally speaking, outside of central Shanghai or Beijing, a nice place can easily be had for well under $250 per month.
Given this, I’ve often asked people here why they choose to buy apartments and potentially face a lifetime of debt rather than renting them, saving a lot of money, and living debt-free. I’m often given responses like, “We Chinese like to feel secure in our homes,” but the main reason is that owning a home is traditionally a prerequisite for marriage.
This is something that’s taken very seriously, and is one of the main reasons why so many Chinese are becoming fang nu (房奴), house slaves: homeowners who are perpetually financially consumed by their mortgages.
I don’t know how many times I’ve made friends with young, single, marriage-age Chinese men in hostels around this country who are in the middle of hopeless seeming searches for homes to buy. Though they often have the financial backing of their families, they still often search for years for a place they can afford with little success. Some actually can’t get married because of it.
The incredibly high cost of housing in China isn’t just an economic issue, it’s a social tragedy.
Meanwhile, developers all through the country are building millions of new apartments every year, but this additional supply doesn’t satisfy the demand and lower the price. In point, in established urban areas or new upper/ middle class developments many — if not most — of these new apartments are not going to people who actually intend to live in them. They are being bought up in droves as investment chips by real estate speculators or just about anyone else with the cash to spare, astronomically inflating the prices.
China provides few secure avenues for investment, the stock market is extremely risky and banks often don’t pay enough interest to keep pace with inflation, so people cache their spare savings in property. This is seen as a safer bet, especially as there is no yearly property tax here. In a country of 1.4 billion people houses will always have value, but until action is taken to adjust investment patterns tens of millions of apartments will sit empty as tens of millions of people search in vain for homes.