For some, housing is out of reach; for others there's a windfall.
Wu Junkai
HONG KONG -- Five years ago Wu Junkai had just graduated from college and moved to Beijing. When the lease came up on the flat he shared with a roommate, he was the only one who wanted to stay. "I thought why not buy the flat once and for all," Wu said.
Even better: the apartment's value has skyrocketed amidst the real estate bubble in China.
"I paid 6,300 yuan ($923) per square meter at that time," said Wu of his 136 square-meter apartment near Beijing's East Fourth Ring. "Now it costs almost 22,000 yuan ($3,223)--I couldn't imagine it has soared so much."
But not everyone is so lucky. Ning Haixin graduated last year, when Chinese housing prices were shooting up. Though Ning works at a high-tech company and earns a handsome salary in the country's capital, he said he doesn't see buying a home in Beijing for the next five years.
Beijing's housing price is going crazy, and people are always talking about housing bubbles," said Ning. "Most of my friends are living in rented flats. I want to wait and see if this property boom will go bust."
Zhang Xin, CEO of Soho China and one of China's richest billionaires, warned a real estate bubble in a recent Forbes interview. (See: "China's Developer Lament") Zhang said developers are rushing to build and sell more property to speculators even though there is no apparent need for more buildings, and the bubble keeps growing.
Beijing along with 69 other large and medium-sized cities in mainland China have witnessed a sizzling property market--property prices climbed 11.7% in March to a 5-year high. Real estate investment in the first quarter rose 35.1% to 65.94 million yuan ($9.66 million), according to latest government data.
Beijing is trying to cool home prices without bursting the bubble. The State Council raised the minimum down-payment required to 50% from 40% for second home buyers and to 30% for first home buyers for apartments larger than 90 square meters. The country's cabinet is also mulling an individual housing consumption tax.
When Wu bought his apartment five years ago, his down-payment was just 20% of the price--far less than Ning would have to put down if he were to buy. And today, it takes 40 years for a middle-income family with an annual income of 100,000 to 150,000 yuan ($14,649 to $21,974) to pay off the loan on a 100 square-meter flat in Beijing, according to Wen Hongwei, project director at the Beijing branch of Guangdong Pearl River Investment.
Wen remains optimistic about the mainland property market. "There may be bubbles in the short term, but after this round of government adjustment, the market will resume a healthy growing momentum in the second half of this year," said Wen.
Sun Hung Kai Properties ( SUHJY.PK - news - people ), Hong Kong's biggest real estate developer by market value, saw its net profit soar 19.7 times to HK$14.3 billion ($1.84 billion) in the second half of last year. The company predicts the mainland China property market will rise in the long run given the central government's strong economic stimulus package and reluctance to raise interest rates, according to its latest financial report. Sun Hung Kai owns of 88.3 million square feet of land in mainland China. Its shares dropped 0.6% as of Tuesday noon.
"Though Beijing is taking action to cool the country's boiling property market, its aim is to keep the market in good stable shape rather than rein in its development as the property market contributes to 10-20% of the country's GDP," said Wen. "March has already seen the country's first trade deficit in the past 6 years. The central government certainly doesn't want to halt another wagon that drives its economic growth."
Jennifer Po-ying Cheung, 04.20.10, 03:45 AM EDT
Source: http://newscri.be/link/1077237
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