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Saturday, 21 November 2009
Speculators, and mothers-in-law, drive property prices ever higher
Rampant stimulus-induced speculation, soaring prices, Mickey Mouse and evil mothers-in-law: Shanghai’s property market has become a brutal and unforgiving world for first-time buyers.
Speculators, and mothers-in-law, drive property prices ever higher
Daniel Ren 21 November 2009
Rampant stimulus-induced speculation, soaring prices, Mickey Mouse and evil mothers-in-law: Shanghai’s property market has become a brutal and unforgiving world for first-time buyers.
The central government’s four trillion yuan (HK$4.5 trillion) economic stimulus package has succeeded in putting the national economy back on the fast track after the blip induced by the global downturn.
In the mainland’s commercial capital, easy credit has fuelled housing price increases that have given the economy a much-needed boost.
Cash-rich investors spent freely on new and pre-owned dwellings, betting on further price increases as Shanghai gears up its efforts to become a global financial centre.
The plan to build a Disney theme park there is music to the speculators’ ears, and they wasted no time in snapping up apartments regardless of elevated prices.
The breakneck growth has created thousands of yuan millionaires as homebuyers have seen their net worth jump more than five-fold in the past decade. But it also masks a multitude of problems. Would-be homebuyers, particularly young people looking ahead to marriage, have found that the market can be unpredictable.
The average price of apartments in mid-November was close to 20,000-yuan per square metre, nearly 60 per cent higher than that at the end of last year.
An average home of 100 square metres now costs nearly 2 million yuan, putting a heavy burden on young couples wanting to buy apartments.
A popular saying now is the “housing prices are more cruel than a tiger”.
It was reported that a white-collar office worker in his late twenties committed suicide by jumping off a building in August because he could not afford to buy a property ahead of his marriage.
Several years ago, mainland internet users coined the term “mortgage slave”, or fangnu, to describe the numerous young couples who spent the majority of their income paying off their hefty mortgage loans.
Now, many university graduates in Shanghai cannot even afford to become mortgage slaves. Down payments are a standard 20 per cent of the transacted value, meaning it can take nearly 10 years simply to save a deposit.
Surely they could just rent?
Alas in Shanghai, parents are often reluctant to endorse their daughter’s marriage to a man who does not own his own home. Another popular saying has it that mothers-in-law are the root of the housing boom evil because they force would-be sons-in-law to buy homes.
With the Shanghai World Expo approaching, chances are slim that the city’s housing prices will drop in the near future. Beijing pumped trillions of yuan into the economy this year to combat the global slowdown, increasing the risks of an asset bubble as a large portion of the funds were invested in property and stocks.
Economists predict the housing market boom in Shanghai will continue until the end of the expo next year, reflecting belief that property is still a good buy due to increasing fund inflows.
Home prices on the mainland are expected to climb 20 per cent by the end of 2010, according to UBS AG analyst Eric Wong.
Shanghai residents blame the government’s inertia, saying it has given wealthy speculators free rein while doing little to improve housing conditions for the underprivileged.
Shanghai Mayor Han Zheng conceded in August that the city’s housing prices were “too high”. He said the city government would increase land supply and accelerate construction of economical housing for low-income families.
Nonetheless, the average price of houses transacted in the week ended November 15 was up 21 per cent from the previous week, according to Shanghai Uwin Real Estate Information Services.
At a press conference early this month, the mayor said there remained 7.4 million square metres of dilapidated homes to be torn down in Shanghai, and 320,000 families would be relocated in line with the so-called urban renovation campaign.
He said the government would draw up a plan to improve housing conditions for poor families and submit it to the city’s legislative body for scrutiny next year.
For Ken Chen, a 27-year white collar worker, there is a ray of hope: a recent report by Guotai Junan Securities predicted that a peak in prices would occur in 2016.
“By then, I will be 34. I won’t be too old to get married at 34,” he said.
2 comments:
Speculators, and mothers-in-law, drive property prices ever higher
Daniel Ren
21 November 2009
Rampant stimulus-induced speculation, soaring prices, Mickey Mouse and evil mothers-in-law: Shanghai’s property market has become a brutal and unforgiving world for first-time buyers.
The central government’s four trillion yuan (HK$4.5 trillion) economic stimulus package has succeeded in putting the national economy back on the fast track after the blip induced by the global downturn.
In the mainland’s commercial capital, easy credit has fuelled housing price increases that have given the economy a much-needed boost.
Cash-rich investors spent freely on new and pre-owned dwellings, betting on further price increases as Shanghai gears up its efforts to become a global financial centre.
The plan to build a Disney theme park there is music to the speculators’ ears, and they wasted no time in snapping up apartments regardless of elevated prices.
The breakneck growth has created thousands of yuan millionaires as homebuyers have seen their net worth jump more than five-fold in the past decade. But it also masks a multitude of problems. Would-be homebuyers, particularly young people looking ahead to marriage, have found that the market can be unpredictable.
The average price of apartments in mid-November was close to 20,000-yuan per square metre, nearly 60 per cent higher than that at the end of last year.
An average home of 100 square metres now costs nearly 2 million yuan, putting a heavy burden on young couples wanting to buy apartments.
A popular saying now is the “housing prices are more cruel than a tiger”.
It was reported that a white-collar office worker in his late twenties committed suicide by jumping off a building in August because he could not afford to buy a property ahead of his marriage.
Several years ago, mainland internet users coined the term “mortgage slave”, or fangnu, to describe the numerous young couples who spent the majority of their income paying off their hefty mortgage loans.
Now, many university graduates in Shanghai cannot even afford to become mortgage slaves. Down payments are a standard 20 per cent of the transacted value, meaning it can take nearly 10 years simply to save a deposit.
Surely they could just rent?
Alas in Shanghai, parents are often reluctant to endorse their daughter’s marriage to a man who does not own his own home. Another popular saying has it that mothers-in-law are the root of the housing boom evil because they force would-be sons-in-law to buy homes.
With the Shanghai World Expo approaching, chances are slim that the city’s housing prices will drop in the near future. Beijing pumped trillions of yuan into the economy this year to combat the global slowdown, increasing the risks of an asset bubble as a large portion of the funds were invested in property and stocks.
Economists predict the housing market boom in Shanghai will continue until the end of the expo next year, reflecting belief that property is still a good buy due to increasing fund inflows.
Home prices on the mainland are expected to climb 20 per cent by the end of 2010, according to UBS AG analyst Eric Wong.
Shanghai residents blame the government’s inertia, saying it has given wealthy speculators free rein while doing little to improve housing conditions for the underprivileged.
Shanghai Mayor Han Zheng conceded in August that the city’s housing prices were “too high”. He said the city government would increase land supply and accelerate construction of economical housing for low-income families.
Nonetheless, the average price of houses transacted in the week ended November 15 was up 21 per cent from the previous week, according to Shanghai Uwin Real Estate Information Services.
At a press conference early this month, the mayor said there remained 7.4 million square metres of dilapidated homes to be torn down in Shanghai, and 320,000 families would be relocated in line with the so-called urban renovation campaign.
He said the government would draw up a plan to improve housing conditions for poor families and submit it to the city’s legislative body for scrutiny next year.
For Ken Chen, a 27-year white collar worker, there is a ray of hope: a recent report by Guotai Junan Securities predicted that a peak in prices would occur in 2016.
“By then, I will be 34. I won’t be too old to get married at 34,” he said.
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