Focus

Poor construction quality keeps foreign property buyers away

(China Daily)
Updated: 2010-04-12 08:21

Construction lawyer Ashley Howlett has lived in Beijing for six years. He says China is full of opportunities and wants to stay in Beijing for as long as he can, but also says he will not buy an apartment here because it would not be worth the millions of yuan it would cost.

Howlett, who leads the Greater China construction practice as a partner with Jones Day in Beijing, talked with METRO reporter Si Tingting about why most foreigners don't buy property in the Chinese capital.

METRO: Do you think buying property in Beijing is a good investment opportunity for foreigners?

Howlett: The current law is that foreigners can only buy one apartment in China. Prior to 2007, they could buy more. But few foreigners are buying apartments here these days because most don't see China as a strong real estate investment opportunity, particularly given the prices. The money needed to buy an apartment here can buy a lot more land in other countries.

There is a huge supply of rental apartments and not much demand for them because locals don't want to rent, which makes renting comparatively cheap. I rent a lovely apartment here for next to no money at all, certainly for far less than the mortgage I would have to pay. So there's no incentive financially for me to buy.

For many nationalities, particularly Europeans, renting is far more common. Buying is more an English and American phenomenon, and a Chinese phenomenon as well. So in many foreigners' view, an apartment in Beijing is somewhere you live, not an investment.

METRO: In addition to high property prices in China, are there any other reasons that you are not interested in buying an apartment here?

Howlett: I think in China there's not such a focus on good quality. People accept inferior quality because they don't necessarily know otherwise. It's only been in the last 20 years that the country started building commercial apartments.

I bought a 70-year-old house in New Zealand, which will probably stand for another 170 years. Here you look at a building that's 70 years old - probably there aren't many left - and they are likely falling down. People here don't hold the same expectation of quality as many foreigners hold.

I'm not trying to criticize, but it's just where China is at the moment. I think in the future people in China will become more discerning about this.

Chinese contractors are not used to building high-quality stuff, because there's no demand for it. Things go up extremely quickly, but the quality is often not good.

I won't buy an apartment in China, because I've looked at the construction quality here.

METRO: Do you think there's going to be a rising number of lawsuits over bad quality buildings in China?

Howlett: I haven't seen a boom of such lawsuits, but there could be one. I think people in China, for obvious reasons, don't often think long term. People are more worried about things that may happen tomorrow or in the next two or three years, than they are about what may happen in 50 years. But at some stage in the future, people will start to think more about the long term.

The quickly built but cheaply made buildings in Beijing will not literally fall down, but will deteriorate. Wall paint will peel and elevators won't work. Buildings will become uncomfortable because they will not have been properly maintained. That's when people will start to realize they've paid a lot of money to buy a place in the Central Business District and they've paid management charges, but nothing works and everything looks really poor. But the developers will probably be long gone by then, so I'm not sure what people will do.

Many buildings in Beijing are built with the cheapest materials available, which tend to degrade quickly. This is a worryingly common phenomenon. There are many buildings here that appear as if they are 10 or 15 years old, but are really just five years old. That's a little bit sad.

I have a 75-year-old apartment in New York, but it's still in great condition. You don't see that here. Fast and cheaply built apartment complexes dominate the property market here and there will be future consequences for this. And it might be apartment owners who end up paying them.

I choose to live here because the country has great future. But the construction quality here is just not good enough for me to put $1 million into an apartment. I could put the same money into real estate some place where I can be reasonably sure the building will be in great condition for decades to come. I can't see that in China.