Dream of a home transformed China into the world’s biggest home market
November 27, 2018 Category China News Round-up, Weekly
In the past decades, China has been transformed from a country with almost no home ownership – private property was still not protected by law – into the world’s biggest housing market, with USD1.7 trillion of new home sales last year, seven times the total transactions in the U.S., according to Stansberry Churchouse Research.
One of the pioneers was Meng Xiaosu, who became President of China’s first real estate firm – the China National Real Estate Development Group (CNRED) – and devised a plan to develop property in the country. In 1984, Deng Xiaoping had made a speech supporting private housing ownership. In 1987, Shenzhen’s authorities sold the first land-use rights in China. A year after Shenzhen’s pioneering move, a national law was enacted to officially define the concept of “economically affordable housing” and “commodity housing,” or privately owned homes. In Shanghai, Guo Guangchang’s Fosun Group built the company’s first residential project, now known as Fosun Garden. Country Garden, also founded in 1992, would go on to become China’s largest property seller today.
The real estate transformation made billionaires out of property developers, including Evergrande’s Chairman Xu Jiayin at USD36 billion, Country Garden’s Vice Chairman Yang Huiyan at USD21.6 billion, and Wanda Group’s Chairman Wang Jianlin at USD20.2 billion. Residential housing construction became one of the main pillars of China’s extraordinary growth over the past four decades, helping to create a thriving middle class. Once a very American dream, home ownership is now also a Chinese dream and has become the ultimate symbol of success in China.
But as prices have soared and investors have hoarded flats, many Chinese – especially young adults – now find themselves worrying that owning just one home may forever be beyond their reach. If the property bubble burst, China’s economy could be in trouble. “That is the biggest potential risk as property is a major source of Chinese families’ assets,” said Gan Li, Professor at Southwestern University of Finance and Economics. “The poorer the family, the heavier their properties weigh in their wealth. If home prices collapse, the wealth of most Chinese will largely shrink and that will end up with a plunge in consumption.”
Chinese citizens devote as much as 74% of their savings toward housing, more than double the 35% in the U.S. Today, 90% of Chinese families own a home, while about one out of four Chinese households own multiple homes, according to China’s Southwestern University. Home prices have skyrocketed 325% in the past two decades. the South China Morning Post reports. Meanwhile, Chinese property buyers are spending less overseas – in Sydney, London and New York – as a tightening of capital control regulations in the past year has reduced the amount of money they can remit overseas.
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