- Published on Saturday, 03 November 2012 16:56
- Written by David Pierson & Julie Makinen / Los Angeles Times
BEIJING—Rising
home sales and prices are cheered in the US as keys to an economic
recovery. But in China, the prospect of a housing surge is fraying the
nerves of policy-makers.
Alarmed by ballooning
values—and the growing frustration of average citizens fearful of never
owning a home—China’s central government in 2010 introduced curbs to
cool the nation’s overheated real-estate market. It worked. Tighter
credit, a crackdown on speculators, and limits on purchases of second
homes slowed price rises and stopped some developments cold.
But those moves also
put the brakes on China’s hard-charging economy, which relies heavily on
construction and real-estate activity, just like the US economy. Last
week China said its third-quarter gross domestic product growth had
slowed to 7.4 percent from a year earlier, the slowest pace in
three-and-a-half years.
China’s leaders now
face some tough choices. Do they rev up the housing market to create
jobs and boost economic growth, even if it means fueling class tensions
and a potentially dangerous real-estate bubble?
“A lot of things like
steel-making, coal and construction equipment have taken a huge hit from
the falloff in real estate and would presumably be boosted by a
recovery,” said Patrick Chovanec, an economist at Tsinghua University in
Beijing. “The only reason they’re not boosting real estate is that the
alternative is actually worse.”
Real-estate agent Wang Yu longs for the return of the go-go years.
She works at a luxury
housing development on the outskirts of Chengdu, a booming metropolis of
14 million people in southwestern China. Modeled after a European
village, the project, known as Salzberg, boasts faux Tuscan villas and
cobblestone streets named for composers such as Strauss and Schubert.
On a recent weekday,
the sales office was empty. Outside, a mangy dog sunned itself near a
dry fountain with a statue of Beethoven. Wang said demand dried up when
the government made it tougher for buyers to qualify for mortgages.
Nearly a quarter of the development’s 145 homes remained unsold, she
said, including the most expensive property, a 3,800-square-foot unit
priced at $800,000.
“A few years ago, people would get loans,” Wang said.
He Kunwei, a senior
broker at 21st Century real estate in Chengdu, said he, too, is
struggling; his sales numbers are down more than half since last year.
Despite the government’s efforts, housing remains expensive and out of reach for the vast majority of Chinese.
The average annual
salary in Beijing, the highest in the country, was $8,900 last year.
Meanwhile, the average price of a typical 100-square-meter home (about
1,076 square feet) in nine coveted Chinese cities, including Beijing and
Shanghai, is slightly more than $192,000, according to SouFun, China’s
largest real-estate web site. That’s about 45 percent higher than it was
three years ago.
Prime property in the capital can cost well into the millions of dollars.
Popular Chinese
novelist Mo Yan, the winner of this year’s Nobel Prize in literature,
joked about the problem in an interview with state media that ricocheted
through Chinese social media. The author, whose works are laced with
social criticism, said he would use his $1.2 million in Nobel winnings
to buy property in the capital.
“I’m getting ready to
buy a house in Beijing, a big house,” Mo said, according to a
translation by China Digital Times, a US web site. “But then I’ve been
warned I won’t be able to get anything that big.”
It remains to be seen
whether China’s new leaders, set to be named in November in a
once-in-a-decade handover, will change course on real estate. Among
their considerations: Local officials throughout China are desperate to
revive the market because their budgets rely heavily on land sales to
generate revenue.
So far, Beijing has
given no indication it will soften its stance. Although China is
vulnerable to a larger global slowdown, its economy is in better shape
than it was after the 2008 financial crisis. Back then, millions of
migrant laborers were out of work.
China’s real-estate
boom has also generated resentment among many average Chinese. Luxury
apartments are viewed by some as the spoils of the privileged—and the
corrupt. Just in October, state media reported that an urban-management
official in southern Guangdong province is under investigation after it
was discovered that he owned 21 homes valued at $6.3 million. His
official salary: $1,500 a month.
Experts say the
central government is wary of tensions being created by the nation’s
growing wealth gap, one of the factors leading to the crackdown on
real-estate speculators two years ago. China is now aiming to build tens
of millions of apartments aimed at low-income residents.
“They learned their
lessons from 2010, when they ended up with a very dangerous situation
with public anger,” said Rosealea Yao, an analyst for GaveKal
Dragonomics, a Beijing research firm. “The government’s credibility was
damaged then. This time around they will not let it happen again, even
after the leadership transition.”
Beijing’s efforts to
keep real estate affordable are little comfort to Chinese bachelors such
as Gao Chuan, for whom buying a home is a crucial first step to
attracting a bride and starting a family.
A recent college
graduate, the 20-year-old is determined to buy property in his hometown
of Chongqing in central China. His parents have offered to help with the
down payment. The trouble is that homes in his $80,000 price range
would require a three-hour commute to his new accounting job.
“I don’t see the
effects of the government policies. Prices keep growing,” Gao said. “I
feel like if I don’t buy an apartment now, I really won’t be able to
afford one in the future.”
In Photo: Shanghai’s crowded skyline. (AP)
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