On the heels of the recent market collapse in China, look at this fascinating note that was sent to King World News:
Home Ownership in China A Distant Dream
“I live in China and the problem here is not demand. Nor is it supply. The problem is that due to ever rising property prices in top tier cities (where the jobs are), only a small, very wealthy group of people can actually afford to buy apartments…
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You only need to look at the average price per square meter in top tier cities like Shenzhen or Beijing, where one square meter costs from 40,000-100,000 RMB. That means the average apartment for a small family costs between 3-10 million RMB. When the average salary in top tier cities is 3-5000 RMB per month, home ownership is a distant dream for a very large portion of the population.
Sure, those that can’t afford a house in the city can buy outside the city, but whats the point of buying a house you will only live in on holidays, while you must still pay rent in the city? While a small portion of the Chinese population (the wealthiest), would surely suffer greatly from a housing price collapse, overall, to create a healthy real estate market and to allow more of the population a better chance at the “Chinese dream”, the best thing that could happen in China is a collapse of the housing market.
This would allow the housing prices to fall in line with the general population, rather than what has been going on now for years, which is a tiny percentage of the population buying up everything in sight, while the vast majority are left with only two options: Borrow from both sides of the family for a huge down payment and become a “mortgage slave” for most of your life, or let home ownership remain a dream.”
King World News note: Based on that ground level report, it certainly appears that the Chinese housing market is still priced in the stratosphere. The only question is: What kind of chaos would ensue in China’s financial system if the housing market really collapsed?
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