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Main Topic: Buying Real Estate Chinese Style

Hosts: James Stanworth , Clyde Warden

For Sale Sign Real estate speculation and bubbles are common from London to Tokyo, but in Greater China, home prices reach levels that make buyers' heads spin. During real estate bubbles, these prices go through the roof, but even during less speculative times, prices are many times higher than in the West, even though income levels are less than half. In this episode, Clyde and James tell about the shopping stage of buying a home. Using their own experience, they look at some of the underlying cultural reasons for these high prices and exactly what is involved in the buying decision.

Although a home is a basic human need, the question of rent vs buy is often very cultural. For Chinese consumers, a house is a vital part of their public face. What is interesting is that once a house is owned, not much goes into the inside. Home sales do not automatically translate into a long stream of purchases for the home. The most typical home these days is a flat or condo. Independent standing homes are more rare, especially in the coastal China cities. The market is dominated by developers who use young adults to sell the flats. Almost no information or details are known by the sales staff. It can be disconcerting talking to a new collage graduate about spending over a million USD. Prices are based more on an expectation of huge profits from price increases than any actual value. It is a generally seen as an investment rather than a living space, thus roping in two major Chinese values, face from owning, and get rich fast investments.

Renting, on the other hand, can be very reasonable, since many homes are second homes for investment, sitting around vacant for years. Even with high vacancy rates, owners are highly resistant to lower prices; it is after all an investment that MUST pay off. From the buyer's perspective, the value is very difficult to evaluate with any metric. It is common to hear the story about someone who took the huge loan then doubled his/her money within a year. Chinese tend to never talk about their loses though. In the end, although Greater China is seen has being flush with cash, lots of that cash is sucked into the housing market. The mainstream consumers are under huge pressure to take on large mortgages, leaving very little disposable income. Consumers then emphasize cost savings on their consumer good purchases.

This is the material Clyde picked up while talking to the salesperson. This includes the floor plans, and price quotes. Download the PDF here .

Chinese consumers are not shy when it comes to big investments. Individual stock trading is the norm, and the capital individuals manage would shock most Americans.

There is quite a high acceptance rate for this crowded feeling... the free standing house is not a norm.There is quite a high acceptance rate for this crowded feeling . . . the free standing house is not a norm.

The Show:

Length: 52 minutes. Download MP3 24MB (Right click->Save As).


Consumer CamConsumerCam:

Vid. 1) New flats for sale, with their own sales, and right across the street four realtors.
Vid. 2) Getting the sales pitch from a young salesman.

Bottom Line:

  • Housing comes in different forms--typically apartments but also terraced and to a lesser extent detached houses.
  • Chinese like new housing. Old housing lacks appeal because it hurts the hope of a quick flip sale, and DIY is not valued.
  • Older housing, if kept and restored, often converts to business premises.
  • New housing comes with a substantial price tag.
  • Housing can actually depreciate--particularly since a purchaser often expects to change the interior, with substanial costs involved.
  • New properties are suprisingly sparsely furnished--lacking water heater and airconditioning.
  • Property is often bought to give face and as a tangible sense of family security, with second homes bought for investment.
  • These considerations seem to cloud the normal paramount concern of Chinese--good value (value is out the window).
Category: Podcasts

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