If Chinese wealth per capita is roughly 1/10th that of the average US citizen -- both in terms of median and mean -- and if Chinese wages are roughly 1/6th that of the average US citizen -- both in terms of median and mean... How on Earth are Chinese houses on average MORE EXPENSIVE per square foot than houses in the US?
My brain just can't understand.
The average house is not at all more expensive in China than in the US.
It is true that in particular cities like Beijing or Shanghai the average sits around $7-9k per square meter (divide by 10 roughly for square foot), far higher than the average in the US. (divide by ten roughly for square foot). That's way more than in the US. But then consider these are megacities with a GDP of roughly half a trillion dollars. About half a million millionaires live in Beijing, Shanghai and Hong Kong. These are the top tier cities of the 22nd century's superpower, prices are going to reflect the notion that property in these cities should keep its value and appreciate strongly.
Median wages are already on par in these cities with various eastern-european countries. And income inequality is among the worst in the world, so you've got this small percentage of people who can elevate property prices to ridiculous heights. Only Shanghai and Beijing each have a population equivalent to 25 times San Fransisco, so a few rich people adds up to ridiculous prices.
I'm not saying these prices necessarily make sense, I certainly wouldn't buy there. But it's also not impossible to see why they're this high.
The median income in Beijing is around 18k RMB/month. The one bedroom we were renting was 7500 RMB/month, which was considered neither cheap nor expensive...it was definitely cheap for what I was making but then I had to forgo a lot of niceties that I wanted (like a real shower). My rent in the states is much higher but I don't have to worry about the same crappiness that even a high-end Beijing apartment has.
Never drink the water though. Even boiling isn't that safe anymore, just use bottled.
The median income in Silicon valley California is around $7000/month. The one bedroom rent is $2000/month.
so it seems, Silicon valley and top Chinese cities comparable when it comes to expensive housing ...
Still, paying half your before tax income on rent vs, less than 30% is really significant.
The other factor is that the Chinese government places very strict controls on where rich people can "park" their money- Since they can't take large sums of money out of the country, they have resorted to using local real estate as a sort of gold substitute for stockpiling their $$$.
About half of Chinese are peasants, for lack of a better term. Is that 'abject poverty?' They're living primitive lives. I think applying the term 'abject poverty' may be a little inappropriate. Many enjoy a good bit of property, autonomy and are not living drastically foreshortened lives.
> and shouldn't even be considered a part of the market where those houses lie ... should be normalized
Yes, analysis of China is frequently misleading due to the vast peasant population. Unfortunately attempts to correct for this run into a very serious problem; the US CO2 per-capita figure ceases to be a multiple of China for hundreds of millions of Chinese. A highly undesirable result for a number of reasons.
So don't expect that sort of analysis to become a thing any time soon.
Compared to who?
http://articles.latimes.com/2012/mar/18/world/la-fg-china-ca...
“The U.S. Department of Housing and Urban Development released its annual Point in Time count Wednesday, a report that showed nearly 554,000 homeless people across the country during local tallies conducted in January. That figure is up nearly 1 percent from 2016.
Of that total, 193,000 people had no access to nightly shelter and instead were staying in vehicles, tents, on the streets and other places considered uninhabitable. The unsheltered figure is up by more than 9 percent compared with two years ago.” (To scale, that would be 2.5 million homeless in China which has roughly similar figures: https://en.wikipedia.org/wiki/Homelessness_in_China).
Would you prefer to live in a tent on land you didn't own or in a cave dwelling you did?
This is what a cave dwelling is: https://en.wikipedia.org/wiki/Yaodong
From the article you posted it says, “The thriving market around Yanan means a cave with three rooms and a bathroom (a total of 750 square feet) can be advertised for sale at $46,000.”
I have been to Granada in Spain where they have similar dwellings carved into the hill-sides: https://en.wikipedia.org/wiki/Sacromonte#Origin_of_the_caves
I imagine that cave dwelling is a thing in many parts of the world and, though traditional, it should probably not be confused with destitution.
“In the last decade, yaodongs have been brought to the attention of scientists and researchers. These traditional dwellings have been regarded as an example of sustainable design.”
Ref: https://en.wikipedia.org/wiki/Under-occupied_developments_in...
And traffic/parking was pretty bad at that complex, if 25% of the units were unoccupied, I couldn't fathom what full occupancy would actually look like.
https://www.elledecor.com/life-culture/fun-at-home/news/a765...
Another difference is that historically Australia has also had poorer quality of housing as well, eg. inadequate insulation (https://www.abc.net.au/news/2017-01-03/why-bad-housing-desig...). But yes we do have some pretty big houses, at least compared to most of Asia, much of the UK etc.
What is artificially created demand for real estate? Isn't all demand for real estate "real", whether as a home or an investment.
But in Australia you cannot tax-deduct the interest on your own home, whereas in the US (IIRC) you can. I would expect the artificial inflation to be higher under the US system.
The real causes of the high house prices IMO are: a) poor government policy, from federal to council level, the net effect of which is preventing the market to be adequately supplied with new housing; and b) a range of cultural factors (notably the image of housing as a safe investment, that is being cultivated with increasing desperation by the real estate industry) that results in channeling of investment into established housing.
What most people ignored is that it would spike rents and cause more short-term harm, especially as lending tightened
Everybody was casting for something to blame and ignored the most obvious solution staring them in the face - an increase of property supply (as you've said)
Edit: it might be interesting to see if there is a recession in China (or globally), how the central bank there might respond in contrast to QE schemes that the US and European central banks used.
"By the end of 2017, the ratio of total household debt to disposable personal income hit 107.2 percent. This number is above the level in the US before the 2008 financial crisis. The structure of China's household debt has also diversified. Housing mortgages only increased slightly in 2017. ... But other types of loans, especially short-term loans, increased rapidly last year. One reason for this is that families have to seek other ways to finance their home purchases due to the tighter controls on mortgages. "
http://www.globaltimes.cn/content/1115334.shtml
"China’s household finances look more stretched than those in most emerging markets, though the level of household debt remains less than that in most developed economies, Fitch Ratings said in a report on Tuesday. China’s household debt-to-disposable income ratio, a gauge of indebtedness, has jumped 9 percentage points every year since 2015, driven by mortgages and other consumer debts. If left unchecked, the ratio could hit 100 percent by 2020 versus 82 percent at end-2017, Fitch said. That would put China on par with the United States and Japan, whose household debt ratios are estimated to be at 105 percent and 99 percent, respectively."
https://www.reuters.com/article/china-economy-household-debt...
"On the back of a boom in property prices, household borrowing has been climbing for 10 years straight, at a pace that rivals any such run-up in major economies. At $6.7 trillion, and a record 50 percent of gross domestic product, private debt is now approaching developed-world levels and crimping consumer spending power."
https://www.bloomberg.com/news/articles/2018-04-24/the-7-tri...
Are the number of people per square foot much higher? I know in Tokyo people's expectations are very different.
But wealth is about 2000% higher and wages are 440% higher in Japan.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe... https://www.numbeo.com/property-investment/compare_cities.js...
I'm curious about the no property taxes comment though - does that refer to China or Japan? I thought China had taxes on everything, including property.