Society and Life

Going through the roof

By Hu Yuanyuan (China Daily)
Updated: 2011-06-01 10:09

Top: Residents in Xiayang town, Nanping city, Fujian province, still live in ancient wooden houses without toilets. Above: The third phase of the Taiyang Xingcheng real estate project in Beijing with some 3,000 apartments will be ready to occupy in 2012 at an average price of 45,000 yuan per square meter. Top: Wang Min / for China Daily; Above: Wang Jing / China Daily

Wang Yang, a 46-year-old college teacher, clearly remembers the time he lived in a small apartment in the university. Similar to the college dormitories of today, there was usually only one shared kitchen and a toilet on the same floor.

"I lived in a room with a floor space of some 8 square meters. My neighbors were all my peers from the university," Wang says. "At lunch time, the kitchen would bustle with excitement. We tasted dishes with different flavors."

Such buildings, mostly built in the 1950s and 1960s, aimed to address the housing needs of staff. China adopted a welfare housing system where the State enterprises built houses for the use of employees.

"We never thought about owning an apartment. The enterprises would allocate a room for us according to our age, work experience and title," Wang says.

Shen Jun, a 38-year-old employee at a State-owned enterprise based in Beijing, thought he'd follow Wang's footsteps. But he failed to get company accommodation.

Shen jokes with his colleagues that it would have been great if he had failed the entrance exams for postgraduate studies in 1997.

"When I took up a job offer after the three-year postgraduate studies, I suddenly found I couldn't get an apartment from the enterprise anymore. But my college mates who went to work all led cozy lives in their apartments," Shen recalls.

In 1996, China set up a matching fund system to encourage people to buy their own apartments. Enterprises and employees contributed the same amount of money to the fund. In 1998, China abandoned the welfare housing system.

Shen still remembers the sense of loss after hearing the news.

"Suddenly, I didn't know what to do," he says.

On May 9, 1998, the People's Bank of China began offering individual mortgage loans. But at that time, only a few people took it up.

"Chinese people really hate debt, especially in the 1990s when a 10,000 yuan ($1,150 according to the exchange rate then) loan could be a big sum," Shen says.

Born in a small village in eastern China's Anhui province, Shen could hardly afford a house in Beijing when the average price for residential buildings hovered around 1,000 yuan per sq m in 1998.

Shen says he desperately wanted an apartment so that he could marry his girlfriend whom he had been dating for six years. Then a news story about "economically affordable housing" caught his eye.

On Oct 29, 1998, the country's first 19 low-cost housing projects, including the largest two - Tiantongyuan and Huilongguan - made their debut at the Beijing Real Estate Transaction Center.

Beijing's municipal government priced the apartments at about 2,600 yuan per sq m, or half of the market average, by reducing taxes to property developers and limiting their profit margin to no more than 3 percent. However, most of the apartments were located in the northern rural-urban fringe.

"When Beijing's Fifth Ring Road was only a plan and personal cars were a luxury, living in a remote location was unimaginable for most people working in urban areas," Shen says.

He finally bought one in Tiantongyuan due to the "attractive price". Thanks to the newly opened Line 5 subway, Shen spends much less time in traffic. He also finds it increasingly difficult to afford an apartment in Beijing's urban area.

The property price around Beijing's North Fourth Ring Road jumped from about 5,000 yuan per sq m in 2001 to nearly 30,000 yuan in 2010, says Shen, adding that his salary increase is far from catching up with the property price growth.

Beijing's property price hike began in 2005 when prices increased more than 20 percent to 6,776 yuan per sq m from January to November, industry statistics show.

In the following two years, the capital's property prices had an annual growth of more than 10 percent. The prices in second-tier cities have also caught up.

The soaring prices peaked in late 2007, when apartments were sold within days of being listed.

"People even had to rely on 'connections' to buy an apartment, and the prices could jump more than 1,000 yuan in a week," says Chen Liang, a 29-year-old company executive who bought an apartment along Beijing's East Fourth Ring Road in June 2007.

The average price for his apartment grew from 11,000 yuan per sq m in June to 16,000 yuan in October 2007.

To rein in runaway property prices, the government launched a slew of measures, called the "eight principles", in 2005 to cool down the market. The measures did not work.

On July 11, 2006, six ministries issued a notice limiting foreign capital in the real estate market and tightening the management on foreign institutions' investment and individual property buying in China.

The intensive measures finally slowed property prices in 2008. Beijing, Shanghai, Shenzhen and other cities saw drops in property transactions and prices.

The short-term price fall was over in 2009 amid the global financial crisis. Most cities witnessed a strong rebound in late 2009 and 2010. Property prices in Beijing jumped more than 50 percent in 2009.

Chen Gang, 26, faces a complicated situation when thinking about buying a home in Beijing.

Without a Beijing hukou, or a registered permanent residence, Chen cannot buy an apartment in the capital unless he has worked in it for five years and has supporting documents such as taxation certificates.

"Being a slave to housing loans is sad enough, but I don't even qualify to be one," says Chen, who has only worked in a foreign enterprise for two years.

The central government again took measures to curb the price growth. According to the National Bureau of Statistics, of 70 large- and medium-sized cities surveyed, more than half experienced a fall in property values or a slower rate of increase in March.

The key to address the problem, according to industry insiders, is to boost housing supply, especially affordable housing.

Premier Wen Jiabao said the country will start to build 10 million units of government-subsidized housing in 2011, nearly double last year's 5.8 million units.

(China Daily 06/01/2011 page8)