[Opinion] Chinas Real Estate Bubble
Chinas real estate market is booming. It has only been eight years since the market opened up, but it is even hotter than the Korean market. Although public housing is being sold to individuals to support domestic housing demands, and newly built houses are being sold, the growth of the market is so fast that signs of a bubble are already showing up in five years. Even though there are many empty houses left, fraudulent advertisements that houses are all sold out can be seen. Many people looking for marginal profits are crowding to temporary real-estate brokers.
Chinas urban population is expected to reach 700 million by the year 2020. Taking this into account, it means that every year, two million apartments of 30 pyeong, or 200 million square meters, must be provided. Foreigners who see the 2008 Beijing Olympics and 2010 Shanghai Expo as an opportunity to make money have joined in the real estate ventures. Koreans have also followed them into the market. Last year, China introduced a real-name account system, realty-transfer tax regulations, a prohibition on unregistered asset transfers, and last month raised interest rates, but this was not enough. Rumors of new regulations abound.
According to a poll taken recently by Chinese portal site Sina, 91 percent of 15,000 people answered that they purchased a house on bank credit. A total of 31 percent of those people pay more than half of their income to repay those loans. One of Shenzhens houseless persons, Zhou Tao, lamented on an Internet site, If I buy a house on bank credit, it will take half of 15 years income. I will become a slave to my house. Until prices fall to a reasonable level, I will not buy a house. Other houseless people are sympathizing with him.
About 90 percent of Americans use a mortgage loan when buying a house, and repay it until retirement. Each month they pay the payment for housing and cars; Americans call this the payment life, in self-deprecation. I wonder, if house prices fall, like Zhou wishes, wont his income decrease with it? He ought to know that these days, its hard for Koreans to get bank credit.
Hong Kwon-hee, Editorial Writer, konihong@donga.com
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