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Sohu: Average Chinese People Face Heavy Housing Debt and a Housing Surplus in Small to Mid-sized Cities

Sohu published an article on China’s housing market stating that average Chinese people face heavy housing debt. It predicts that a surplus in the housing market will develop in many small to mid-sized cities and in the countryside. A translation of two major points contained in the article follows:

1) For an average Chinese family the value of their house accounts for the largest portion of their wealth. According to a 2017 Wealth Research report that The Economic Daily published, the value of a family’s property accounts for 70 percent of their total assets. Those wealthy families who sit at the top of the pyramid find it very affordable to pay cash for their housing. However, an average family can only afford such a purchase if they take out a loan and borrow money. As they enjoy an increase in wealth they also have to bear a heavy debt payment on their loan. For cities like Beijing, Shanghai, and Shen Zhen, a house can easily cost over tens of millions of yuan. For an average middle income family that has an income of 30,000 to 50,000 yuan per month (US $4,760 to US $7,934 a month), many take out home loans in the millions of yuan. They only have 10,000 – 20,000 yuan (US $1,587 to US $3,174 a month) left to spend each month and they still have a child to raise. Their money situation is so tight that they live like poor people but sit on a high priced property.

2) We don’t need to wait for a sharp decrease in population to see signs of a housing surplus in China right now. The signs are here. For example, in Northeastern cities, where the population is decreasing and the economy is declining, the real estate market is very slow. There is a serious housing surplus in those regions. In the third or fourth tier small to middle sized cities, largest numbers of houses are vacant. For those who were born after 1980, 1998, or 2000, if they live in fourth and fifth tier cities, they may own at least two pieces of residential property. One is their own house and the other one is the house they inherited from their parents. Many of them may own as many as three or four houses. It is expected that, after decades, as the population in China drops rapidly, other than those top 20 big cities, the rest of the small to middle sized cities and the countryside will have a surplus of housing.

Source: Sohu, February 8, 2018