Source : Business Times – 15 Dec 2009
Many facing drained savings, long-term mortgages, anxiety
Computer engineer Jenny Jin and her husband have been hunting for a home for a year, but like many young would-be property owners in China, they have struggled to enter the market due to soaring prices.
Now, with a baby due in February, the Shanghai couple – who already spend a fifth of their combined monthly income of 13,000 yuan (S$2,648) on rent – say that they can no longer wait, even if prices are higher than ever.
Property prices in 70 medium-sized and large cities in China rose 5.7 per cent last month from a year earlier, the fastest rate in 16 months and the sixth consecutive monthly on-year increase, the government said last week.
The boom has been bolstered by easy bank loans, tax breaks and a lower down payment threshold, introduced by the government in the past year to support the real estate sector, a key driver of China’s economic recovery.
But concerns are rising that property bubbles are building due to speculative investors, amid rumours that a large portion of the government’s 586-billion-dollar stimulus package has been channelled into asset markets.
Fears that policymakers might withdraw these measures next year to dampen speculation have also triggered a round of what analysts call ‘panic buying’, further fuelling the price surge and increasing stress for younger Chinese.
For many property hunters, buying a home not only drains savings and plunges them into decades of so-called ‘mortgage slavery’, it also eats into the savings of their parents and even grandparents.
‘If my parents didn’t help us pay half of the costs, we would have had big problems affording the house,’ said 31-year-old Beijing resident Chris Zhang, who is married and has a nine-month-old son.
Ms Zhang and her husband, who were living with her parents for five years, just bought a government-subsidised low-cost two-bedroom flat on the outskirts of the capital for around 400,000 yuan – eight times their annual income.
A recent study by the Chinese Medical Doctors’ Association, which interviewed three million office workers in 15 cities, found that buying property had become the top cause of anxiety for nearly half of those surveyed.
In an ongoing online poll conducted by Iyaya.com, a website targeting young parents, 57 per cent of the respondents agreed that ‘having a house may not necessarily bring happiness, but not owning one definitely means unhappiness’.
The trials and tribulations of buying a home in China have even made it to the small screen.
The TV drama Dwelling Narrowness focuses on a young woman who becomes the mistress of an official so she can help her sister buy a house, stoking debate over how much one should sacrifice in the quest for home ownership.
Earlier this month, one man in his 20s pitched a tent in a Shanghai subway station in what was seen as a poignant protest about the city’s skyrocketing housing prices, according to the Shanghai Daily.
The man, who had just broken up with a woman who demanded an apartment as a condition of marriage, posted a sign reading: ‘I do not want to be deprived of the right to get married because I have no apartment.’
In response to mounting public complaints over soaring prices, the government said last week that it would curb speculative home purchases next year, a move that analysts said was expected and should have been carried out sooner.
In a sign of policy tightening, the government has said that from next year, individuals selling their homes will only be exempt from paying a 5.5-per cent tax after at least five years of ownership, instead of the current two.
However, risks may still build as the real estate industry will remain crucial to growth in the world’s third largest economy given the relatively gloomy outlook for external demand next year, they argued.
‘Export demand is likely to disappoint next year while there are limits to more fiscal stimulus,’ Ben Simpfendorfer, a Hong Kong-based economist with the Royal Bank of Scotland, said in a research note. ‘The property sector may thus be overly relied on to drive growth, raising risks of a bubble.’
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