The Chinese government has tried to calm the soaring real estate prices, fueled by sometimes very organized speculation (the famous Wenzhou groups). These prices have created considerable wealth more in the cities. The average wealth in Beijing, 70% of real estate, is close to 9 million yuan ($1.3 million); some popular areas of the capital have seen prices per square meter multiplied by 20 in 15 years (see here). This madness has not been accompanied by sufficient housing construction for the most modest households – 600 million people have 1000 yuan of income per month (see article). Shenzhen has nothing to envy in terms of soaring prices. In recent years, the authorities have been accelerating the construction of social housing. According to the Chinese press, the municipality of Shenzhen wants to put an end to speculation and is implementing a policy of social housing, like the Singaporean model.
Shenzhen, objective to 2035
The objective is to reach in 2035 an offer of apartments for rent or sale, representing 60% of the total offer. In 15 years, 1.7 million flats are to be built, 1.1 million will be for rent. The government is extending a series of measures to make land available.
5.5 million new inhabitants are expected to settle in the city, which will require 1.83 million apartments. The authorities aim for qualified (talented) employees at prices equivalent to 60% of the market price, families at 50%, and the lowest income at 10%.
Singapore, a model
Shenzhen wants to move away from the Hong Kong model, where speculation and high prices go hand in hand. It is inspired by the Singapore model, which, as early as 1964, put in place a public housing construction program to solve the shortage of housing at the time and encourage low- and middle-income populations to buy the new constructions. Public housing makes up the majority, which is managed directly by the government. According to media surveys, there are 30 square meters for every Singaporean, compared to 15 square meters for a Hong Kong national. More than 80% of the population resides in these dwellings.
Changsha and Chongqing in advance?
Changhsa, the capital of Hunan, has already taken this path. There are already 237,800 social housing units, 20,000 are built every year. Chongqing is also ahead in this area. The former mayor, Huang Qifan, regrets that this social housing in general in China is not open to newcomers, but to old residents, see the article. The newcomers slow down their consumption because they have to pay too much rent. With the help of this housing, Changsha and Chongqing have not reached the stratospheric prices of other cities.
Has everything been done against speculation?
We are in 2020, and the rise in real estate prices is phenomenal over the last 18 years. Has the government done everything to curb this rise? Has it wanted to oppose this speculation? On the one hand, measures to limit purchases have been introduced. On the other hand, the credit floodgates feeding speculation have opened regularly. The first to be informed (well placed) of the new borrowing measures took advantage of this to take out large loans and buy at attractive prices before prices soared. Besides, local governments took advantage of this windfall, as did interest groups with close ties to the highest levels. In an environment where corruption was estimated at 20% of the selling price, it was a win-win situation for everyone. We want to speed up the construction of social housing, very good. Isn’t that normal for a government that proclaims itself to be socialist?
Articles on real estate :
2nd September 2020