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Scott Jagow: Let’s flashback . . . to the year 2006. Remember the stories from the housing market? People flipping housings like pancakes. Buying up condos in Florida before the cement was dry. Seems like a long time ago now, but that’s still what the Chinese real estate market is like now. Lisa Chow reports from Beijing.
Lisa Chow: The first thing you have to know about buying homes in China is that traditionally, buyers used to pay the full price of the house — all at once. Seriously, bags of cash on the settlement table. But young entrepreneurs here — men and women in their 20’s and 30’s — are starting to catch on to the whole credit thing.
Jean Peng bought three apartments last year. She paid half in cash and borrowed the rest from the bank. Peng says it was a good investment.
Jean Peng (voice of interpreter): Since the beginning of this year, my stocks have fallen 40 percent, whereas the value of my real estate has increased 30 percent. So I prefer to put my money in real estate.
In the last couple of years, housing prices rose so fast — more than 40 percent in major cities last year — it created urgency among people who may not have considered buying a home to break into the market.
Wei Wei is 26, and bought his first house when he was 22:
Wei Wei (voice of interpreter): At the time, prices were cheap. Now, I wouldn’t be able to afford it.
He put 50 percent down in 2004. When he bought his second house a year and a half ago, he put 20 percent down. So many people started doing this that it made China’s central bank nervous. After all, this movie is still playing out in the U.S. and Europe.
So China’s central bank raised interest rates six times last year and now requires buyers to put 40 percent down on second homes.
And how do these young, small time investors have so much cash on hand? For one, they have good salaries by Chinese standards. And unlike young college educated Americans, they don’t have student loans to pay off.
And there’s no stigma to living with your parents. So many do, including 28-year-old Michael Wang.
Michael Wang (voice of interpreter): I have been staying with them ever since I came back from college abroad. I’ll probably stay until I get married.
He’s not worried that living with mom and dad will make him appear uncool to potential mates. In China’s dating world, a nice real-estate portfolio makes you hotter property.
In Beijing, I’m Lisa Chow for Marketplace.
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