The Chinese property bubble

Mr. Loverman

I live in Beijing so I thought some of you might be interested to know what's going on over here.

There is an insane property bubble in Beijing (and China in general).

A very high wage in Beijing is about €1,000 per month. This would be someone working as an accountant in the financial district. Basically someone who is considered very well off.

The average person earns somewhere between €100 - €250 per month.

To give you a bit more context on the wages situation, there is a popular TV show here where a young person (mid-20s) is given a good job in a top company. It's sort of like Dragon's Den. The monthly wage they are normally offered is in the region of €200. This is supposed to be good.

But of course Beijing is dirt cheap. I have just bought four beers and a couple of litres of water in the Chinese version of Centra, i.e. an expensive enough convenience store. It cost 90 cent in total.

So what about house prices?

It costs at least €120,000 to buy a two bedroom apartment in a decent enough suburb very far away from the city centre (about an hour on the subway). So the rich guy working in the Beijing IFSC has to pay 10 times his annual wage for an apartment in the middle of nowhere.

Parents are expected to significantly help with the purchase of their children's first home. Normally they will pay the entire amount in cash. This makes the property bubble in China a bit different than Ireland's. There isn't a debt problem. Also, the country really is booming. It's not a fake credit boom like what happened in Ireland.

Rents are fairly low. I live in a place called Donzhimen which is considered very upmarket (skyscrapers, etc.) I pay €520 a month for a two bedroom apartment. I don't know what my apartment would sell for but it would be a lot more than €120,000. Maybe €600,000?

So overall the situation is messy and complicated and pretty interesting from an outsiders perspective!

I'll update this thread whenever I come across new information.

wyndham

The black economy must be major?

investment

Mr. Loverman wrote: »

I live in Beijing so I thought some of you might be interested to know what's going on over here.

There is an insane property bubble in Beijing (and China in general).

A very high wage in Beijing is about €1,000 per month. This would be someone working as an accountant in the financial district. Basically someone who is considered very well off.

The average person earns somewhere between €100 - €250 per month.

To give you a bit more context on the wages situation, there is a popular TV show here where a young person (mid-20s) is given a good job in a top company. It's sort of like Dragon's Den. The monthly wage they are normally offered is in the region of €200. This is supposed to be good.

But of course Beijing is dirt cheap. I have just bought four beers and a couple of litres of water in the Chinese version of Centra, i.e. an expensive enough convenience store. It cost 90 cent in total.

So what about house prices?

It costs at least €120,000 to buy a two bedroom apartment in a decent enough suburb very far away from the city centre (about an hour on the subway). So the rich guy working in the Beijing IFSC has to pay 10 times his annual wage for an apartment in the middle of nowhere.

Parents are expected to significantly help with the purchase of their children's first home. Normally they will pay the entire amount in cash. This makes the property bubble in China a bit different than Ireland's. There isn't a debt problem. Also, the country really is booming. It's not a fake credit boom like what happened in Ireland.

Rents are fairly low. I live in a place called Donzhimen which is considered very upmarket (skyscrapers, etc.) I pay €520 a month for a two bedroom apartment. I don't know what my apartment would sell for but it would be a lot more than €120,000. Maybe €600,000?

So overall the situation is messy and complicated and pretty interesting from an outsiders perspective!

I'll update this thread whenever I come across new information.

Is the country dangerous ?

Do many people speak english, hospitals?

How long would 1000 euro's last?

Are the women good looking?

Is there a good standard of living?

johndaman66

investment wrote: »

Is the country dangerous ?

Do many people speak english, hospitals?

How long would 1000 euro's last?

Are the women good looking?

Is there a good standard of living?

It seems like your considering heading over there. Make sure to ask all the important questions first;);)

Hmm, we thought things were bad here. Regardless of the causes and drivers that still would seem to be a very unhealthy property market based on your figures, regardless of how progressive their economy is. Are you sure that the apartment your living in would sell for circa €600k? If you are renting it for €520 a month that gives an absolutely crazy rent multiplier figure. Also, it would seem to be unaffordable to Beijings top earners.

I wouldn't have thought too many Chinese parents had €120k (or the CNY equivalent obviously) burning a hole in their pockets but I could well be wrong in making that assumption?

magneticimpulse

China is deifinitely the next big World player regarding economy.

However they fix their currency very low....I dont know too much about the economy but I do know the USA complains alot that they fix their finances so it looks good and they can export alot....the USA think the value should be increased..

After working with alot of Chinese, I would not like to have any investment there. They just agree with everything you say and never tell you the truth. I work in a Science environment where it is important to be very accurate. They just make up stuff to look good and I find myself doing double the work to make up for their lies or finish a job they did not carry to completion. Based on this culture I would be dubious about to part cash with them.

Also they dont have a high safety record. Isnt there lots of construction workers injured each month in China because they try to cut corners and build very quickly without taking complete care and looking at health/safety/fire exits etc.

Mr. Loverman

wyndham wrote: »

The black economy must be major?

Lots of people are paid in cash, and cash is preferred over things like bank transfers or credit cards.

investment wrote: »

Is the country dangerous ?

Do many people speak english, hospitals?

How long would 1000 euro's last?

Are the women good looking?

Is there a good standard of living?

China is very safe. They don't have the skanger/scumbag culture we have in Ireland. For example, you will never see pointless vandalism or groups of teenagers causing problems.

Most people do not speak English, but you can get by using a combination of pointing and smiling. Chinese people are nice and patient. Beijing is very tourist friendly (English or at least Pinyin signs everywhere).

You can live as cheap or as expensive as you want here. If you live like a Chinese person your €1000 will last a few months (excluding accomodation).

I don't really find Asian women attractive so I'm probably not the best person to answer that question, but the women take care of themselves and I would describe many of them as being 'cute'. They like white men. I get positive attention from the women every day. If I was single I could have a lot of fun.

Your standard of living can be as high or as low as you want. My standard of living is very high here, but by Chinese standards I am rich. But things like public transport, internet, food, etc. are excellent and cheap. Also, the quality of their apartments is high. They don't do the cardboard-wall-shoebox apartments we have in Ireland.

johndaman66 wrote: »

Are you sure that the apartment your living in would sell for circa €600k?

Most Chinese people cannot afford to rent nevermind own in Dongzhimen. This is across the road from my apartment (http://www.topboxdesign.com/raffles-city-new-office-retail-tower-in-beijing-china/) so that'll give you an idea of the sort of place it is. I am probably being conservative with the 600k figure!

johndaman66 wrote: »

I wouldn't have thought too many Chinese parents had €120k (or the CNY equivalent obviously) burning a hole in their pockets but I could well be wrong in making that assumption?

Well, there is a culture of saving here (debt is seen as very bad) and the culture is geared towards family, so it's possible the average couple have built up a lot of savings by the time their kids (or more likely, kids) is in her early 20s.

magneticimpulse

Ive seen on TV they have ghost cities just like Ireland has ghost towns. The property bubble might be strong in the capital, but I heard it has crashed in the rest of the country. Many other cities having high expectations but were crushed because of the global recession.

So overall I heard they have had an excess of property in ghost cities.

Also the 1 child per family thing will mean alot of changes. I heard there is too many men and not enough women...this might mean more excess compared to demand in the near future.

I still think they are very laid back when it comes to quality and safety standards.

Victor

magneticimpulse wrote: »

I still think they are very laid back when it comes to quality and safety standards.

They are 'differently quality / safety conscious'.

One of the important cultural differences is that in China "the boss is the law" and disagreeing with the boss just isn't done.

the_syco

investment wrote: »

Is the country dangerous ? No, once you live by the rules.

Do many people speak english, hospitals? I think there are more Chinese speaking people there than there are english people.

How long would 1000 euro's last? I think €20 gets you a 4 or 5 star hoel for the week in some places.

Are the women good looking? Yes. But also mostly small.

Is there a good standard of living? Unknown.

magneticimpulse wrote: »

Also they dont have a high safety record.

Cars built in china for chinese are death traps.

magneticimpulse wrote: »

Ive seen on TV they have ghost cities just like Ireland has ghost towns.

This is true. And we're talking about cities made up of 50 storey apartments which are empty.

magneticimpulse wrote: »

Also the 1 child per family thing will mean alot of changes. I heard there is too many men and not enough women...this might mean more excess compared to demand in the near future.

Women are sometimes kidnapped for marriages

magneticimpulse

I also heard they have to lower the speed of their high speed train because it has not been built to the correct standard in order for it to run safely. They apparenty built it too quickly and there have been at least 2 major accidents in which people were killed recently.

I do have firm belief that overall China is going to be the next big thing and it could be a clever idea to invest there. But with their current policies and cultural differences...I think it is too far apart. You would have to be married to a Chinese person or be extremely close. They still have a long way to go before their culture becomes international and to conform standards that we live by with morals.

I would rate Indians higher than Chinese. They seem to have better morals and be nicer in general. India also seems to be the next big thing. I am obviously judging this from a stereotypical viewpoint and based on the visiting scientists I have worked with. However I think when it involves cash/investment, you do have to consider these things since it is so different to Irish/Western culture. I have worked with incredible lovely Chinese and hard working ones...but I have also met 50% ones who would stab you in the back. Also too many bad experiences from ebay buying fake copies which they pass off as real haha.

It could be possible to invest but people would have to act with caution. You would have to be very clued up and living there for some time I'd think. Also it is very far away...id rather move to Australia if that was the case.

johndaman66

Mr. Loverman wrote: »

Most Chinese people cannot afford to rent nevermind own in Dongzhimen. This is across the road from my apartment (http://www.topboxdesign.com/raffles-city-new-office-retail-tower-in-beijing-china/) so that'll give you an idea of the sort of place it is. I am probably being conservative with the 600k figure!

Looks very fancy and modern and thanks for posting. Still though I don't see anything on the link to suggest a 600k asking price, unless I'm missing something staring me in the face (which is very possible too!). Don't get me wrong, I'm not for one moment suggesting your lying or misinformed but all the same I'd like to see documentary evidence for myself;)

johndaman66

Mr. Loverman wrote: »

things like public transport, internet, food, etc. are excellent and cheap.

Am I correct in saying that the internet and media in general would be very restricted over there in terms of the content they can publish and many websites from the Western world would be blocked. Have heard that on a few occasions before but it may have changed in recent years.