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China's Hot Real Estate Market Takes Broad Toll
Originally published on Wed March 13, 2013 5:36 pm
RENEE MONTAGNE, HOST:
In China, property prices continue to spiral upwards, despite government efforts to cool off the hot real estate market there. In recent weeks, there have been warnings that the Chinese housing bubble will burst, with dire effects on the broader economy and the entire world. Some don't see that happening, and one skeptic is Leta Hong Fincher. She is a sociology researcher who studies real estate in China. We reached her in Beijing.
Thank you for joining us.
LETA HONG FINCHER: Thank you for having me, Renee.
MONTAGNE: Now first of all, how much does an apartment cost in the major city like Shanghai or Beijing?
FINCHER: Well, let's look at Beijing. If you wanted to buy a one-bedroom apartment of about 500 square feet, it would cost you on average of around $150,000.
MONTAGNE: Which means it's New York City prices in Beijing without the New York City incomes.
FINCHER: Exactly. They, in Beijing, the average income would be less than 12,000 U.S. dollars a year. That means that somebody trying to buy an apartment would have to pay at least 15 times, or maybe 20 times, more than their annual income in order to buy one apartment that would be rather small.
MONTAGNE: Well, what exactly is driving up prices to that extraordinary degree?
FINCHER: There is absolutely insatiable demand among young Chinese people for homes. But what's really fascinating is that in spite of these astronomical home prices, there are very, very few young Chinese people who opt out of the home buying norm. And there are many, many reasons why that is. And partly it's because if you're renting then you're really at the mercy of the landlord. It's very easy to be kicked out of your apartment. And there's also no Social Security net really in China, and so a lot of these young people really crave a sense of security. And also their parents really want them to buy a home. And then we can get into the fact that the average age of the first-time home buyers is so young; it's around 27 years old.
MONTAGNE: The idea being that you need to have a home in order to get married and embark on a separate life?
FINCHER: Well, yeah, that's definitely a big part of it. But even that aside, owning a home is seen as a marker of status and the longing in the middle class, and it's seen as much more important than having even a high income. It's quite shameful for a lot of men, in particular, if they can't afford to buy a home. And there is actually a Chinese saying called naked marriage, which is the term for when you get married but you don't have your own home.
MONTAGNE: Oh, so given social pressure and various other pressures to buy a home, still and all, they are so out of whack price-wise with young people's salaries, how do they manage it all?
FINCHER: Well, these studies that have shown that over 60 percent of home purchases are made with significant backing from the parents. So usually if it's a couple getting married the parents of at least the man's side, and often the woman's side as well, will contribute a lot of money towards the down payment on a home.
MONTAGNE: Does that mean that you don't see an imminent crash in the real estate market because there is money behind it somewhere?
FINCHER: There are many reasons. First of all, the Chinese tend to draw on their savings much more to buy a home. So you're not going to have anything like the sub prime mortgage crisis that you had in the U.S. Also that just because the social pressure to buy is so intense, and that I don't see that changing at all anywhere in the near future.
MONTAGNE: Leta Hong Fincher is a doctoral candidate in sociology at Tsinghua University in Beijing, where she studies gender issues and the real estate market.
Thank you very much for joining us.
FINCHER: Thank you for having me. Transcript provided by NPR, Copyright NPR.