Why Buy a House in China?

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One of the most popular questions I get asked by Chinese people is, do we rent or own our apartment? You know, when we first moved in and I was told how much the apartment cost, compared to the amount of rent we pay, I was shocked, but I didn’t really think through why exactly I was so surprised. I sat down for a minute tonight and looked at the numbers. So, we bought our house in the US for $156,000. Everything about it is bigger and more spacious than our house here, mostly because it’s in the country, and of course, things like that are not an option here. Our tenants rent the house for $1250 a month (fair market value, also happens to be our mortgage payment). In ten years, the rent would equal the purchase value of the house (crazy that the mortgage is for 30 years, but I don’t want to think about that).

Our first apartment, in Chengji (aka Hell Hole), only 6 years old at the time.

Our first apartment, in Chengji (aka Hell Hole), only 6 years old at the time.

A building marked for demolition.

A building marked for demolition.

 

Now for our Chinese apartment. Our landlord probably purchased the apartment for 2 million RMB, which is about $325,000 US. The apartment is probably half the size of our US home, and there’s something else to consider. Chinese homes maybe last for 20 years before the development and the building have so deteriorated that they just knock the building down and build another one. I know that for a while after purchasing, the value goes up, but compared to American homes which maintain their value pretty easily, Chinese homes depreciate very quickly, and eventually you’re left with nothing but a check from the government. (My English student’s father was so surprised that our home in American is built from wood, but is over 100 years old.) Okay, so he paid $325,000 for the house, but he only rents the house to us for $690, and he couldn’t get any more for it. At that rate, it would take him 39 years to make back the value of the house. The apartment building will probably be long gone by then. This article says that China’s buildings last only 25-30 years on average, and at some point before the end, I am guessing you can’t ask for much by way of rent because the condition of the neighborhood will have gone downhill. I just don’t understand that!

I think I’d rather have a nightly money-burning ceremony on my roof than buy a house in China (but Chinese people really need to buy one because that is how they get their hukou, which is their papers that allow them to work, attend school, get medical attention, etc.).

Our current home, a really lovely neighborhood, but already showing signs of decay around the edges.

Our current home, a really lovely neighborhood, but already showing signs of decay around the edges.

Our $325,000 apartment. I just don't get it. But I'm grateful we don't have to pay rent in proportion to it's value.

Our $325,000 apartment. I just don’t get it. But I’m grateful we don’t have to pay rent in proportion to it’s value.

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2 comments

  1. It all depends on the developer you’re buying from of course, and that seems hit and miss really unless you have inside information or have other buildings they’ve made to go off of. Your best bet is to buy something in a lucrative area (和平区) where even if the building does crumble (which it won’t if you had enough to buy from a good developer) then at least your not going to lose everything because the land is so sought after. Either way, the time for buying in China is not now, I’ll buy another house in the states before I buy something here until things change. Renting is totally fine with me.

  2. Yeah, I don’t think I’d ever, ever buy a house here.

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