Dominic Darmanin

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Some Insight into the Chinese Housing Market and Mind-Set

A South African man who has been a 10 year resident in Shenzhen, China has a regular blog where he discusses daily life in China. His YouTube channel is SerpentZa. He did one show on “Owning Property in China” which presents his perspective into the Chinese housing market as a foreigner living in China.


Shenzhen is a tier 1 city which apparently has more millionaires than anywhere else in China. He gives two reasons why he doesn't buy property in China:


1)      Poor Quality – Properties in China are just not maintained. Builders use poor construction material and this is quite common throughout China. New buildings look great when they are completed but within 1 to 3 years, due to lack of maintenance, they start to deteriorate.


2)      Avarice  – Property investment has been a sure- fire way to invest and make a good return. Instead of buying just one property however, the Chinese “grab” as much as they can get. People buy multiple properties which in turn boosts the economy tremendously.


Now, the Chinese government tries to rein in this euphoria by placing restrictions on property ownership such as a married couple are only allowed to own 2 apartments. Couples bypass this restriction by divorcing on paper so they can buy more than 2 properties. Or when the government places lending restrictions or requires a certain amount of deposit to own a second or third property, people then borrow money from shadow banks or loan sharks. Naturally, this leads to a massive amount of personal debt being accumulated.


The Chinese government recognizes the dilemma it faces because if it places too many restrictions on property ownership then the housing bubble may burst with devastating consequences, which of course it does not want to happen. So every time the bubble seems like it's about to burst the government provides stimulus like low interest loans or other incentives to keep buoying the property bubble.


As for the people of China, they have faith that the government will keep property prices up and sustain this trend to prevent the house of cards from imploding. Apparently the housing “scheme” (as the presenter calls it) has to be constantly refuelled to prevent it from collapsing.


Bottom line, you don't get value for money when you buy property in most of the tier 1 cities in China. Instead, you get a box in the sky which doesn't really belong to you because property ownership in China is actually only a 70 year lease from the government. The reality is the property you leased won't last 70 years in any case because of shoddy construction, so you won't want to hold on to it for a long time anyway.


This perspective serves to educate us in the West on another motive why so many Chinese want desperately to get their money out of China among many other reasons besides.


SerpentZa, worth checking out for some insight into the Chinese way of doing things for those of us who have no clue.

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