How can Chinese people still afford buying their expensive home?

An increase demand

Although the price seems to be an obstacle on purchase, the Chinese carry on to buy and maintain a speculative real estate bubble. The reason for the surge in prices is the small number of goods sold on the market; 90% of the Chinese population owns, in comparison, in France only 60% of the population owns its home. The remaining 10% of the property is divided between the rent and the willingness of the Chinese to have a secondary property; 20% of Chinese owners own a secondary property.

The reason for such a rate is in the measures taken by the Chinese government when it opened its market in the 1990s. At that time the real estate market did not exist and the government was the sole owner of the Housing. In the early 1990s, China’s reforms made it possible for individuals to own the home they occupied for a nominal price and also gave their new owners the opportunity to lease their property. The real estate market has emerged.

How can Chinese people afford expensive home?

The purchase of real estate in China is not the same as in Western countries. In China, the buyer appeals to the community (parents, friends, …). We can not understand this phenomenon without focusing on social criteria. In China, it is more difficult for a man to find a wife due to the Chinese population which has 10% more men than women. In order to find a suitable wife, access to property is an essential criteria in the woman choice. Because of the single child policy, the child has the burden of transmitting the name and lineage of his family. Parents thus invest the savings of a lifetime in the purchase of a real estate property from which they will benefit because in many cases the family once retired settles with the child to educate and take care of the new generation. If the parents do not have enough money to subsidize the child, they will appeal to their friends and family to finance the future of their child, which they will refund in long term.

The financing of the banks only takes part in second. China is afraid of unpaid and debts, the result is that the buyer before arriving at the bank must have a minimum of 30% of the purchase amount in cash before getting a loan, the amount to bring to obtain a second property before being granted a loan is even more important (60%). These amounts are obtainable because of the under-consumption of Chinese which is one of the strongest in the world.

Another solution that the Chinese possess to buy is via a common background of assisted ownership. Every month the Chinese have the opportunity to contribute by deducting a portion of their salary that will be placed on an interest account and with that, they will be able to collect cash back when they decide to access the property. Remember that unlike Western banks, Chinese banks depend on the government and aim more for stability than seeking profits, there is virtually no way for the contributor to lose his contribution.