The lending rate for purchasing a house has reached the lowest point of the past 6 years
More than 130 cities have implemented policies
To stimulate the real estate market
My students asked me: “Should I buy an apartment now?”
Do such property bubbles exist in China?
In 2012, some students who hadn’t transferred their hukou to Beijing asked me
Should they buy a house?
Prof. Song Guoqing who taught macroeconomics told the young people
Half-jokingly
“If you’re rich, buy one”
“If you’re in short of money, lend money from the bank and buy two”
In other words, at that time
Houses were well worth investing
Houses were sold out as soon as they were released
And later people needed to apply for and win a lottery before buying a house
The public were extremely confident about the property market
Over the past decade
We’ve experienced a property price surge
In major cities in China, young people’s home ownership rate is high
He has his name on the property certificate
But his parents probably paid most of the money
But for a young family
If they have a big property loan on the shoulders too early
They would not dare to start their own business
And they might cut their spending considerably
In the end, they were deeply in debts
Some people just really need a house
Such people who are younger than 30
They buy a house for marriage to a great extent
“The Mother-in-law Effect” has long existed in China
When we went to take a survey in rural areas in Yunnan
We found among the students who dropped out of middle schools
Boys account for a large proportion
Because they wanted to go out to work as early as possible
So they could earn enough money early and build their own houses in hometown
Then they could find a wife and get married
When they are set for a blind date
Boys who have a higher house are more popular
In major cities
Lots of parents buy an apartment to have their children settled down
And for the good public schools nearby
A good public school has limited places
And the policy of equivalent rights between the apartment owner and the tenant hasn’t been fully implemented
In order to enter a public school
The child must be a local resident
And there’re other restrictions
Since this year
Around over 130 cities have implemented policies
To stimulate the property market
The lending rate for purchasing a house has reached the lowest point of the past 6 years
For a first-time purchaser, the amount of the down payment lowers
And relevant policies become less strict
To attract families who really need a house to live in
And they are given some preferential policies
Property tax is an important step
Now it’s introduced on a trial basis
If the tax rate is set at 0.6%
The total amount of property tax income will probably exceed the consumption tax income
In most cases, the property tax income is left to the local government
To improve infrastructure such as roads and bridges
But there’re big gaps between areas in China
So a nation-wide distribution system is probably needed
To coordinate the development of different areas
In 2008, I followed my tutor to the U.S.A as visiting scholars and stayed there for 3 years
The subprime mortgage crisis happened during that period
The trigger was the sharp decline of the property price
30% on average
After the crisis, the Chinese government introduced a 4-trillion-yuan ($586 billion) stimulus package
A large amount of credit loan was made in the property market
Then do such bubbles exist in China?
It seems that China and the U.S.A are very similar to each other
The increasing rate of their property prices exceeds the economic growth rate
“Ghost towns” appear in some places
A lot of houses have been built
But left empty
Some people buy an apartment more because of its appreciation possibility
However, the Chinese government later starts to fight against real estate speculation
And the increasing of the property price slows down gradually
Plus, the residents’ savings rates are extremely high in China
So even if there’re bubbles
They’re rigid bubbles
Which means they’re not likely to burst easily
My parents are going to retire soon
They asked me whether they should buy an apartment
My father said his pension would not be high after retirement
And if he makes deposits in the bank
The interest would be too low
And the financial products are too complicated to him
If they buy an apartment, they can live in it or rent it out
It’s tangible
I didn’t agree with the idea of buy an apartment
But they didn’t listen to me anyway
Chinese people have limited ways in terms of investment
Taking the whole society into consideration
If we just put all of our savings into the property market
For investment
Then other industries would face difficulties in development
It’s a waste of social resources
In order to solve the problem
Firstly, we need to enrich people’s ways of investment
To make more capable valuable companies get financed
Secondly, we need to improve social security
Medical care and pension
Old people depend on their medical insurance account for medical treatment
So if we can improve our medical insurance system
They might not need to turn to other measures
Such as purchasing property
I have been living in Beijing for 10 years and I moved 5 times
I have been a tenant
Property is not necessary for some people
We should make plans based on our own demands
In the short run, if you really need a house to live in
Now it’s the right time of purchasing
Because the lending rate for purchasing a house has reached the lowest point of the past 6 years
Secondly
For those families who want to send their children to a good public school
They can buy a small apartment in the right district
After that
They can rent a bigger house for living
To maintain the quality of life
Thirdly
For long-term investors
They might need to be cautious about buying an apartment for investment
Due to the aging of the population
Our children or grandchildren will inherit a lot of apartments
From their elder generations in the future
Which will lower property returns