WATCH: Architect Stephanie Chen explains the limited options for property purchase in Shanghai
For the past two decades, property has been one of the foundations of China’s phenomenal growth. But there are ongoing worries that the market may be overheating. So should you buy at any cost?
Stephanie Chen lives and works in Shanghai Pudong. She is an architect, and at the end of 2009 decided to buy her first property.
Like many in China’s middle class, Stephanie worried that if she did not get on the property ladder, prices would continue to rise so quickly that she would be priced out of the market.
Continue reading the main story
Across Asia millions of newly middle class families are making personal finance decisions for the first time. We look at the big issues facing them.
Special report: The New Middle Class
Investing in gold in India
Indians struggle with debt burden
With the help of her family, Stephanie paid 1.05m yuan ($162,000) for her first apartment in Shanghai in December 2009.
Since then, property prices have continued to rise. It isn’t easy for the young, for graduates, or even for people already in the middle class to buy property, especially in China’s big cities.
The gap between house prices and income has become too big. A decent apartment can now cost as much as $500,000.
Demand for apartments has been fuelled by buyers like Stephanie, and many others who see property as a a good investment.
In China investors have only a limited range of financial products to put their cash, and with property values still rising, bricks and mortar are delivering higher rates of return than interest rates paid on savings.
Ghost houses
But Patrick Chovanec, Professor at Tsinghua University’s School of Economics and Management in Beijing, is cautious.
“People who buy for investment need a place to stash their cash, so they are buying new units,” he says.
“Often these are just shells of buildings, with no fixtures or fittings inside. Those who are stockpiling property believe that it’s worth a lot.”
Continue reading the main story
“
Start Quote
I don’t think the market will fall immediately, but we have to watch it in the future”
Crystal Ke
Financial adviser
“But we just don’t know how much these properties are worth, because the prices aren’t being tested in the market place,” cautions Professor Chovanec. “Just what would the price be if people started to sell them?”
Well-off Chinese families may own five or even 10 apartments, and some of these might have been standing empty for five years.
Critics say that easy lending and low interest rates have led to a construction boom that has produced ghost housing estates and even ghost shopping malls.
One estimate put the number of unoccupied apartments bought as speculative investments at 65 million units.
Reining in the market
In many cities, ordinary workers have been frozen out of the market, while the middle classes struggle to find an affordable home.
It is this kind of speculation that the Chinese government is attempting to rein in, using a whole raft of measures.
Earlier this year a property tax was introduced, together with a ban on bank loans for a third property.
In addition, first time buyers now have to make a minimum down-payment of 30%, and those buying a second property must find a 60% deposit as well as paying higher interest charges.
In the past few months, official figures show that the market is cooling slightly. Prices of homes are still increasing month on month, but at a slower pace, suggesting the government’s changes are taking effect.
Stephanie has noticed the difference in Shanghai: “I can tell from going to the real estate agent that house prices aren’t rising as fast as they were, and that the number of transactions is down,” she says.
“Also the government is building rent-controlled apartments for low income people, and I think that will make house prices a little more stable.”
Stephanie sold her apartment recently for 1.19million yuan – a profit of 140,000 yuan ($21,000) made after living there for just over one year.
She has bought another home for almost 2.3million yuan. This time she put down a deposit of 30%, and took out a 25-year mortgage because she wanted to pay her family back.
“My parents are healthy and well, but they might need money sometime soon, so I wanted to pay them back what I owed them,” she says.
Safe investment?
WATCH: Financial adviser Crystal Ke advises Chinese first time buyers not to overstretch themselves
Finiancial adviser Crystal Ke thinks it is much better for young homeowners like Stephanie to be independent from their families if they can, and not to overstretch themselves financially.
They should also assess if this is the best use of their money. What about using the cash to start a business? In the current market, even renting could be a good option.
“People think property is a safe investment in terms of their asset allocation, but now is a time to watch and wait.”
“There is a bit of a bubble in the market, it’s not a very big bubble, I don’t think the market will fall immediately, but we have to watch it in the future,” she says.
Professor Chovanec says there’s a difference between buying property as a home, and buying purely for investment.
“If you’re going to live in a property, it’s worth what you’re willing to pay for it. If the price goes down, you still have a place to live. But if you’re buying as an investment, you better be very confident.”
“Ask yourself – what cash will this investment generate? At the moment in China, individuals are investing with no expectation of a cash yield – they just assume the prices will continue to go up. That’s very worrisome.”
The opinions expressed are those of the contributors and not held by the BBC. The material is for general information only and does not constitute investment, tax, legal or any other form of advice. You should not rely on this information to make any investment decisions. Always obtain independent, professional advice for your own
July 4, 2011 Filed under:
Uncategorized | Tags:
China,
class,
cost,
High,
hits,
middle,
of,
property —
admin @ 10:41 am
Mladic in court: ”I’m not going to listen to this”
Continue reading the main story
Mladic on trial
Profile: Ratko Mladic
The charges
How he was caught
The Hague tribunal
Ex-Bosnian Serb army head Ratko Mladic has been removed from a hearing at The Hague war crimes tribunal after quarrelling with the judge.
Gen Mladic was ordered out after continually interrupting the proceedings.
The court entered a plea of not guilty on Mr Mladic’s behalf, after Mr Mladic refused to do so.
Mr Mladic is charged with crimes including genocide in connection with the 1992-95 Bosnian war.
He attempted to speak several times at the beginning of the hearing, but Judge Alfons Orie asked him to remain silent until he was allowed to speak.
He was reprimanded by the judge for speaking out of turn and communicating with the public gallery.
Mr Mladic then refused to enter a plea after his request to change his lawyer to one of his choosing rather than a court-appointed one was denied, because he had not made his request in time, the judge said.
Continue reading the main story
The Charges
Counts 1/2: Genocide of Bosniaks and Bosnian Croats in Bosnia-Hercegovina and Srebrenica
Count 3: Persecutions
Counts 4/5/6: Extermination and murder
Counts 7/8: Deportation and inhumane acts
Counts 9/10: Terror and unlawful attacks
Count 11: Taking of UN hostages
In pictures: Mladic on trial
Ratko Mladic: The charges
When Judge Orie began to read out the charges, Mr Mladic shouted: “No, no, I’m not going to listen to this without my lawyer,” removing his translation headphones.
“Who are you? You’re not allowing me to breathe,” Mr Mladic snapped.
Shortly before guards escorted Mr Mladic from court, he shouted at Judge Orie: “You want to impose my defence. What kind of a court are you?”
After he was removed, the judge read out all 11 charges, including murder and genocide, and entered pleas of not guilty on Mr Mladic’s behalf.
From the moment he walked in, Mr Mladic was absolutely defiant, says the BBC’s Lauren Comiteau who was there, adding that she had never seen anything quite like it in 15 years of covering the court.
Mr Mladic would not take off his hat; he was communicating with the public gallery, giving a thumbs up; the judge warned him not to do that; he continued to do it throughout the hearing, our correspondent says.
He interrupted the judge at every turn he could, and then finally when the judge did start to read out the charges, he threw up his hands, started screaming and he had to be removed from the court, she says.
Meanwhile, survivors, mothers from Srebrenica, were also screaming, saying he killed Muslims, that he should plead guilty, our correspondent adds.
Srebrenica massacre
It was Gen Mladic’s second appearance before the court, after a hearing on 3 June when he declined to plead on what he called 11 “obnoxious” charges.
His Belgrade lawyer, Milos Saljic, had said the former general would boycott the hearing as his defence team has not been approved. Mr Mladic was represented in court by court-appointed lawyer Aleksandar Aleksic.
Gen Mladic was extradited to the Netherlands from Serbia at the of May after being captured following 15 years as a fugitive.
He is charged in connection with the massacre of about 7,500 people in Srebrenica – Europe’s worst atrocity since World War II.
Gen Mladic is also charged over the 44-month siege of the Bosnian capital Sarajevo from May 1992 in which 10,000 people died.