Main Topic: Buying Real Estate Chinese Style

Hosts: James Stanworth , Clyde Warden

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.

Photos:

• (1) Elegant looking apartment block, typical and expensive (note how many are unoccupied). (1) Elegant looking apartment block, typical and expensive (note how many are unoccupied).
• (2) Darkness reveals the reality of how many people are actually living here. (2) Darkness reveals the reality of how many people are actually living here.
• (3) Family temple room. (3) Family temple room.
• (4) A sign that this is a real family living space. (4) A sign that this is a real family living space.
• (5) Four agents in this short strip of road, which is typical throughout Greater China (sign of a bubble). (5) Four agents in this short strip of road, which is typical throughout Greater China (sign of a bubble).
• (6) Agents glam-up this block to draw in drive-by attention. (6) Agents glam-up this block to draw in drive-by attention.
• (7) One of the larger chains. They send agents to stand on corners with big signs and flags. (7) One of the larger chains. They send agents to stand on corners with big signs and flags.
• (8) The high end apartments look to make an early impression - see the marble. (8) The high end apartments look to make an early impression - see the marble.
• (9) The front door leads in to yet more marble and... a crude concrete shell. (9) The front door leads in to yet more marble and... a crude concrete shell.
• (10) The earthquake proof structure has large beams. Oddly some sockets and switches are installed to the wall. Purchasers will have interior designers in to finish the apartment. (10) The earthquake proof structure has large beams. Oddly some sockets and switches are installed to the wall. Purchasers will have interior designers in to finish the apartment.
• (11) Switches, crude metal boxing etc. are taken care of with decoration. Their arrangement though takes little care of the practicalities of daily living. (11) Switches, crude metal boxing etc. are taken care of with decoration. Their arrangement though takes little care of the practicalities of daily living.
• (12) Don't forget . . . the US0,000+ price tag as you look at this picture. (12) Don't forget . . . the US0,000+ price tag as you look at this picture.
• (13) Nice view of the city! (13) Nice view of the city!
• (14) Narrow corridor leads to the main rooms. (14) Narrow corridor leads to the main rooms.
• (15) An idea of the kitchen. The ceiling is left to your imagination! (15) An idea of the kitchen. The ceiling is left to your imagination!
• (16) Private bathing in a public space . . . More marble. I'm not sure I'd wanted to get naked standing in front of that big window! (16) Private bathing in a public space . . . More marble. I'm not sure I'd wanted to get naked standing in front of that big window!
• (17) Living space. (17) Living space.
• (18) This is probably the most often viewed space, looking out this window--a cursory glance while buying (an investment)! (18) This is probably the most often viewed space, looking out this window--a cursory glance while buying (an investment)!
• (19) This crude finish may or may not be taken care of depending on whether this is a home or investment property. (19) This crude finish may or may not be taken care of depending on whether this is a home or investment property.
• (20) Basic bathroom . . . does this say USm to you? The value perception is very distorted in this market. (20) Basic bathroom . . . does this say USm to you? The value perception is very distorted in this market.
• (21) It may be the builder or another seperate contractor who finishes the work to the purchaser's spec. (21) It may be the builder or another seperate contractor who finishes the work to the purchaser's spec.
• (22) A potential buyer figures out how the family could fit in. (22) A potential buyer figures out how the family could fit in.
• (23) Arriving to visit an older (30 years) property with the agent. For sale sign is on the right. (23) Arriving to visit an older (30 years) property with the agent. For sale sign is on the right.
• (24) Narrow old staircase in the house. Leads to . . . (24) Narrow old staircase in the house. Leads to . . .
• (25) . . . a roof conversion. Basic panelling seperates the two rooms to offer living space for extended family members. (25) . . . a roof conversion. Basic panelling seperates the two rooms to offer living space for extended family members.
• (26) At the front outside is a small yard--enough for plants and to sit in front of the house. (26) At the front outside is a small yard--enough for plants and to sit in front of the house.
• (27) A typical style terraced house--around 30 years old. This includes a shop front with living space above. Fairly featureless concrete reflects the hurry of the time to get accommodation built. (27) A typical style terraced house--around 30 years old. This includes a shop front with living space above. Fairly featureless concrete reflects the hurry of the time to get accommodation built.
• (28) This for sale sign reveals something older . . . (28) This for sale sign reveals something older . . .
• (29) . . . a nice front porch with shade and good airflow. (29) . . . a nice front porch with shade and good airflow.
• (30) Space along side the house is empty--clearly something torn down. Often the landed houses are split between siblings upon the death of the owner. In some cases, properties are torn down/apart to liberate the land. (30) Space along side the house is empty--clearly something torn down. Often the landed houses are split between siblings upon the death of the owner. In some cases, properties are torn down/apart to liberate the land.
• (31) Elegant wood construction allows good ventilation--practical for tropical climates. In need of a little repair, here! (31) Elegant wood construction allows good ventilation--practical for tropical climates. In need of a little repair, here!
• (32) These types of carvings (often high quality dense woods) can be picked up all over Macau and China as these older properties are destroyed. (32) These types of carvings (often high quality dense woods) can be picked up all over Macau and China as these older properties are destroyed.
• (33) For sale signs include a phone number. Placing a call quickly brings an agent to show you the place. (33) For sale signs include a phone number. Placing a call quickly brings an agent to show you the place.
• (34) A key concern is vehicle access. Where can I park my car? Difficult access devalues this property. (34) A key concern is vehicle access. Where can I park my car? Difficult access devalues this property.
• (35) All houses have a name plate like this. On the right--Tainan City. On the left No. 68 Shen Mong St. (35) All houses have a name plate like this. On the right--Tainan City. On the left No. 68 Shen Mong St.
• (36) Some older terraced houses have been preserved and restored. These beautiful specimens have an airy central courtyard. Not everyone's cup of tea for living--they are often bought as a business premises. (36) Some older terraced houses have been preserved and restored. These beautiful specimens have an airy central courtyard. Not everyone's cup of tea for living--they are often bought as a business premises.
• (37) Here, this whole street of properties has been restored. (37) Here, this whole street of properties has been restored.
• (38) A property with garage. (38) A property with garage.
• (39) This type of traditional house is seen in many parts of China. The roof is often constructed with bamboo supports. (39) This type of traditional house is seen in many parts of China. The roof is often constructed with bamboo supports.
• (40) Inside of an old property. This can be restored but resale potential is limited. So investment could be wasted. (40) Inside of an old property. This can be restored but resale potential is limited. So investment could be wasted.
• (41) The central area leads out to all the rooms. (41) The central area leads out to all the rooms.
• (42) Most of the downstairs rooms are bedrooms--or converted for this purpose. (42) Most of the downstairs rooms are bedrooms--or converted for this purpose.
• (43) Corridor leads past . . . another converted bedroom . . . to the bathroom built as an extension. The gap between properties is often built up with illegal extensions--as bathrooms/kitchens. (43) Corridor leads past . . . another converted bedroom . . . to the bathroom built as an extension. The gap between properties is often built up with illegal extensions--as bathrooms/kitchens.
• (44) Probably the original bedroom in the house. (44) Probably the original bedroom in the house.
• (45) Kitchen faces in to lane to side of the house. (45) Kitchen faces in to lane to side of the house.
• (46) Toilet and store room. Although now uninhabited little would be much different before--no elaborate decoration or pictures on the wall. Just food and day-to-day necessities. (46) Toilet and store room. Although now uninhabited little would be much different before--no elaborate decoration or pictures on the wall. Just food and day-to-day necessities.
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ConsumerCam:

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).