Why the housing price is keep increasing in China?

12 Mar

Beijing's Real Estate Market Seen Recovery

After the real estate market reform from 1988. The property pricing is increasing all the time. Housing prices in Beijing, Guangzhou and Shenzhen rose 22.5%, 24.2% and 17.6% in 2012 August, according to data tracker China Real Estate Index System. The reason for high housing rate is going to be discussed in this essay.

First of all, the high population is not the problem for the high housing rate in China, such as Shanghai and Beijing. The main element for the high housing rate is the high distribution of population. With the rapidly advancing of China’s urbanization. Poverty is fundamentally a rural phenomenon. Most of the young from some rural areas and some other smaller cities are going to large cities to search for good jobs. Therefore, the high demand for the housing resource is the result. This phenomenon can be explained by economy principle. In the rural and small cities, the infrastructure and humanistic factors are developing slowly. However, regarding to the rapid growing economies, the employment rate, average salary, living environment, infrastructure, education etc. are much better in the large cities than small cities in China.

Therefore, common people cannot afford for the high housing price in the big cities. Nonetheless, the enterprises have the ability to buy or rent the buildings for business and industry. The positive results for the turn up of more office buildings could create more working opportunities. Hence, the GDP will increase. The demand for renting or buying house for living will increase at the same time. Nevertheless, because of the building or house growing use for business, the supply of housing resource will drop. As the high demand and low supply of the houses in big cities, the price of housing is keep growing.

It is mentioned above that worker’s average salary is much higher in a big city than rural or small cities. Conversely, house pricing is still unaffordable for common people in a big city. In 2011, BBC posted: “The gap between house prices and income has become too big. A decent apartment can now cost as much as $500,000.”  Even now the housing price is still increasing.

Why does it happen? In Social side, if common people can’t afford for the house, who can buy the houses? In China, the poverty and rich gap is too big. According to Yasheng Huang’s state for Shanghai:“ The difference in the growth rates between the highest income group and the lowest income group is 20 percent (16.7 percent minus 3.7 percent)”(p187) The rich people don’t care about the price of properties . They would like to invest their savings in properties to make more money. Consequently, this is another force to push the housing price higher.

Moreover, because of the one child policy, the gender balance has been broken. LifeSiteNews reported: “The Chinese state media has admitted that the country’s One Child policy has resulted in a potentially disastrous demographic crisis. The Chinese Academy of Social Sciences reports that the policy that mandates abortion for many pregnancies, combined with sex-selection and a cultural preference for boys has created a gender imbalance.” Besides, BBC News also reported “More than 24 million Chinese men of marrying age could find themselves without spouses by 2020.” Males are much more than females nowadays. Females need to consider about male’s assets when they get married. This improved the requirement of the houses for males. Most of the young people can’t afford the house. However, there is only one child in most of the families. Therefore, parents pay too much expectation on their own child. They would use all their savings to help their child to buy the house.

In the political side, Because of the land monopoly from the government, the cost for Real Estate agency increased. Business insider stated: “Beijing’s government has sold 14.9 million square meters of land in the first 10 months this year, more than during all of 2012, Reuters calculations of official data show.” The Chinese officers have the power to decide which real estate agencies can have the right to exploit the lands. Thus, too many corruptions between Chinese officers caused the increasing of housing price. For example, the land agent has to exploit the new real estate by having the allowance from the government’s officers. Therefore, they would bribe the officers either by cash or by the new houses. Meanwhile, houses could be bought by officers from the using of the bribery. This could have reduced the house supply by the house using of the officers.

Chinese government knows the high housing price won’t be a benefit for China in a long term. In recent years, the social conflicts keep increasing. To head off potential unrest, housing problem will be essential to stable the society. It was stated by BBC news:” the government is building rent-controlled apartments for low-income people, and that will make house prices a little more stable.” Additionally, Xinhua net posted: “The country plans to start construction of more than 6 million affordable housing units and complete the construction of 4.8 million units next year” Besides, according to the ministry’s statistics shows “The country built 4.7 million affordable housing and started construction of 6.3 million units in 2013” Those information shows above tells the public that the house price should have a slightly decline in the following few years. Furthermore, because of the one child policy, the people between 25-34 years old in 2025 will decrease by 30% compare with 2015, which means young labours will decline dramatically. Meanwhile, the housing price will decline rapidly eventually.

In conclusion, this essay is discussed that the High demand and low supply caused high housing price nowadays. Moreover, there is some other different aspects push the housing price higher. The high population distribution makes the demand of houses higher in big cities. Besides, The big poverty and rich gap pull the rich buy the houses for investment. Furthermore, one child policy broke the gender balance and increases the demand for the house, which is used to meet the criteria to marry a girl. In political side, less supply and higher housing price resulted by corruptions of Chinese officers. Nevertheless, the contribution of government’s affordable house inn recent years and the decline of young labours in 2025 demonstrate the housing price would be low between 2020-2030.

Reference:

–       Huang. (2010), Capitalism with Chinese Characteristics, Cambridge University Press.

–       Justin Yifu Lin. (2012), Demystifying the Chinese Economy, Peking University Press, Beijing, China

–       Finance, Why High Land Prices in China Are Not a Bubble, (2013) [online] Available at:

http://knowledge.wharton.upenn.edu/article/high-land-prices-china-bubble/ [Accessed: 11/3/2014]

–              What to Do About China’s High Housing Costs? (2013) [online] available at: http://blogs.wsj.com/chinarealtime/2013/09/16/what-to-do-about-chinas-high-housing-costs/ [Accessed: 11/3/2014]

–       Shao,XY&Qing,KG.(2013) The Uncomfortable Truth In China’s Property Market [online]Available at : http://www.businessinsider.com/the-uncomfortable-truth-in-chinas-property-market-2013-11 [Accessed: 11/3/2014]

–       Pressly,L(2011).High cost of property hits China’s middle class , BBC News [online]Available at :   http://www.bbc.co.uk/news/business-13959239[Accessed: 11/3/2014]

–       China faces growing gender imbalance,(2010),BBC News [Online] Available at : http://news.bbc.co.uk/1/hi/8451289.stm

[Accessed: 11/3/2014]

–       China plans to build more affordable housing ,(2013) Xinhua Net.[Online]available at :http://news.xinhuanet.com/english/china/2013-12/24/c_132993106.htm[Accessed: 11/3/2014]

–       China Admits Massive Gender Imbalance from One Child Policy, (2010), LifeSiteNews .[Online] Available at: http://www.lifesitenews.com/news/china-admits-massive-gender-imbalance-from-one-child-policy[Accessed: 11/3/2014]

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: