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Comment by AdrianB1 | Hacker News Reader

The prices of housing in China are mind blowing. As someone that built a house in Europe with the exigent standards of regulations, the prices asked in China are more than 10 times the cost. Given the lower income in the region, it does not make any sens, the cost should be even lower because a big chunk is labor cost. If the price of the house is 20 times the cost, why would anyone buy? In what industry in the world is such return rate expected? Even drug lords don't have it.

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Labor is generally 50% of the CONSTRUCTION cost. But financing and land are usually more than 50% of the total cost, especially in cities.

That means Labor is less than 25% of the cost. And labor isn't really THAT much cheaper in China than, say, Poland anymore.

Further, China has 1.6B people and 33% of it is mountains -- 69% highlands. It's not insane that land is more expensive than in, say, Serbia.

Finally, the world has never seen almost 600M people migrate to cities in 28 years time. Demand is unmatched in history.

That being said, China's average income per person is about 1/4th what it is in Germany, yet the average house costs nearly double -- with higher interest rates. AND, you only get a 99 year lease on the land you buy there, you can't own it. Taxes are different, sure, but it does seem like prices are quite high.

To add to this: contrary to popular belief, the type of housing built in China is not particularly cheap. Mid-to-high rises cost about 2-3x as much per square foot to construct as tract housing. So even if labor is 1/2 the price in China as in Germany, they type of housing stock might be 3 times as expensive to construct.

Sure, regulations might be more lax in China. But, the point is, the Chinese market is very different from Western markets.

The Chinese government sees housing construction as a jobs program for underemployed farmers. As a result, the workers are very unskilled compared to westerners, meaning they have to overbuild a bit more with concrete and rebar to get something that won’t fall over. Walls and floors are really thick compared to western contructions, and therefore deteriorate more quickly even with proper maintenance.

The main thing expensive about housing in China is the land. The labor is cheap (but inefficient), the concrete is cheap (if overused).

Not to mention, a house built in china will last maximum about 5 years before completely falling apart. They are built extremely poorly with poor materials.

There are entire “ghost cities” of empty housing only a few years after being built, completely dilapidated.

Your second sentence doesn't necessarily support the first paragraph. Houses that aren't lived in, by my observation, rapidly deteriorate no matter the build quality. Old widow dies, and house is tied up in estate arguing for a few years: no one wants it now. Critters get in, it's all closed up with no circulation, all that little shit that niggles at you as a homeowner each weekend starts to add up after a while if you don't take care of it.

These are concrete structures, 20 stories tall, that are collapsing in less than a decade. This isn't a case of lack of maintenance, but poor construction trying to goose GDP.

https://www.youtube.com/watch?v=XopSDJq6w8E

Thanks for the link, that clarifies the point enough to nullify my comment. For those playing at home, there's some point-making stuff around 4:18.

ADVChina is a really good channel., they've traveled extensively throughout China, you can learn a lot from watching their videos that you'd likely never encounter in mainstream news.

Not disputing that they are cheap, but most buildings will be dilapidated after 5 years if they are completely ignored.

Even buildings that are not ignored often look dipolated in China. The apartment I was last living in was a 2010ish, considered a nice place, but you could already see some concrete crumbling and of course, Beijing is a dingy place because of the sand and dirt.

I think most residential construction in China has a shelf life of around 30 years before they have to tear it down and do it again. This is because they favor labor intensive but skills light concrete techniques that require a bit of overbuilding. That way, they can keep uneducated migrant workers employed.

My understanding is that real estate is not taxed in China, so it is used to park extra money or as investment.

There are places in drug lord countries like Central and South America where e.g. condominium prices are $300,000 USD minimum, while people living there are lucky to earn $20-30 USD per day.

Funnily enough you say that as that's some extreme 3rd world example.

In London the average flat price is like $700,000 and a lot of people make $60-70 us per day here...

in china, the major part of house is land price. you have to buy house if you want your kids to go to school, especially in big cities, etc. it is a kind of living tax.

another factor, a lot people believe the housing price will not go down. so, people buy house to make money.

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