Young people should not be able to afford houses

| December 5th, 2009

 20091204-young-people-house-01

[Netease] Chinese TV series “Dwelling Narrowness” has caused national discussion on the continuously raising housing prices currently plaguing the market. Should young people (in China) who were born after 1980’s and just graduated from college be able to buy a home? On this issue, Ren Zhiqiang (任志强) boldly “speaks out directly without reservation”: Young people should not be able to afford houses. (You will find out who this guy is later.)

Ren Zhiqiang says, if you look at developed countries, people under 30 who have only worked a couple of years and solely rely on their income to buy a house is almost zero,. They cannot afford a house if their future income is insufficient to meet the mortgage loans or housing expenses.

Chinese customs and traditions pressure everyone to buy a house, so a high percentage of young people purchase them. In other words, people who are 40 years of age or younger who are buying houses is close to 60%-70%. This ratio is not seen anywhere in the world, the reason is because China’s houses used to be cheap, and also because China has a massive 50-year welfare housing distribution system, so everyone sees owning a private home as a justifiable dream.

Ren Zhiqiang says, owning a house and a car is a dream in the United States. If even to a developed country like the United States it is a dream, and a 30-year-old in China can already achieve this dream, it should mean that China’s spending power and consumption mentality are way ahead of some developed countries, or many many developed countries.

Ren Zhiqiang points out (back in the day) most people in China are assigned to a house at about 40 years of age, 30 year-olds do not get a house. Married couples often lived in dorms and sharing a house was a very common occurrence. Ren Zhiqiang says, “Why do today’s young people want to surpass their parents’ generation? This is a big misconception, people do not always have their own homes. It should really be that having a place to live is enough.”

20091204-young-people-house-03

Other thoughts of Ren Zhiqiang:

1. “’Bubble’ is a concept that appeared after China’s economy was opened up to the world. Only when noodles are selling for the price of shark fin (expensive delicacy) should it be seen as a bubble. Real estate should be analogized to ‘shark fin’ and shark fin should be expensive, it should not be thought of as a bubble, and noodles still have the price of noodles, it’s also not price bubble.”

2. “People who have a place to live should not buy commercial houses, or be entitled to welfare or enjoy a discounted commercial houses. It is precisely because the interpretation of ‘having a place’ is ‘owning a house’, this is what has caused so much social debate and shaky policies.”

3. “Right now the supply of commercial housing quota is decreasing. This year, the Department of Land Resources said 81 cities increased the supply of housing so that 80% is affordable housing and 20% is commercial housing. We should think about real estate as our next meal, if no food is stored, there will be panic.”

4. “Wages are rising and GDP is also rising, it wouldn’t be right if housing prices are not rising. No country in the world has growth in revenue but reduced prices in housing. It does not follow the economic pattern.”

5. “Why is it that the number of people who are under 30 in China that are buying houses is more than 30%? It is because China’s housing prices are too cheap. In fact, in countries in Europe, the United Sates, Japan, and South Korea, young people under the age of 30 cannot afford to buy a house. China’s young people should be unable to afford houses too. Currently, China’s young people rely on the support of their parents to buy houses, which is the typical ‘Nibbling off of Elders Group’ (啃老族: people who live off their elders)”

6. “Our country has entrepreneurs, our country has capital, do whatever the government tells us to do, if it does not let me to do real estate then I would not do real estate. We are only the maids and servants, and the government should have the final say.”

7. “The purpose of the macro-control (economic adjustment) was not to let prices fall, but to have steady growth. Do not think just because the prices did not fall, the macro-control was not in place.”

8. “As long as the demand is there, small-sized developers will continue because there is money to be made. Rising house prices will attract more developers to build houses; on the other hand, if no one is building, the price will go up – it is determined by supply and demand.”

9. “Without huge profits, cannot build a brand name, so that real estate as a brand name should have huge profits.”

10. “I am a businessman. I should not make special considerations for poor people. It is not how business managers operate. My investors would want me to take this money to make more money, not to help the poor.”

11. “Whoever that did not buy a house previously suffered losses…” “People’s wages are still rising, and land resources cannot be increased, how can the housing prices not be rising?”

12. “There is actually plenty of land in China, I never felt that China has no land, at 96 million square kilometers, we have accounted for only 0.3% of the national territory. According to the same population density as the cities, 1% of the land in the country could hold 1.6 billion people. How much does that take? Not much.”

13. “From a national survey, only 8% of people own a second home. Among which less than 6% is commercial. The luxury residential districts were all well lit during the National People’s Congress and the Chinese People’s Political Consultative Conference (NPC and CPPCC). They are mainly are used during the meetings. Poor people cannot afford these houses.”

14. “Developers absolutely will not publish the costs. It’s equivalent to a man taking off all his wife’s clothes, and lets the public to see her measurements, therefore it’s basically impossible.”

15. Because of his view: “Prices should not drop”, Ren Zhiqiang, a member of Beijing CPPCC, Beijing Huayuan Group CEO, is frequently stopped and questioned by reporters. He proposes Beijing to relax the Two Suites purchasing polices to allow more foreign buyers and even wealthy people from other counties to buy houses in Beijing. Price can control the population growth and the quality of the population. Overly expanding the development of social security housing will take up many land resources and narrow the real estate investment volume.

Opposing Views

[From ChinaNews]

Ren Zhiqiang indeed did not change his true colors, continuing his talks earlier “Chinese people are too rich, houses are too cheap”, “Wages are rising, GDP is rising, it wouldn’t be right if housing prices do not rise as well” and other shocking statements. This time he dished out this disturbing point of view “Young people should not be able to afford houses.” Immediately after he made such comment, he was bombed with criticism by netizens. Many people strongly criticized his remarks as being ridiculous from different angles. The view “Young people should not be able to afford houses” was attacked severely by the “guns” and “cannons” of the netizens.

Perhaps not from an economic perspective, but solely from common sense, Ren Zhiqiang’s view is absolutely wrong. Whether or not young people should be able to afford houses is not up to Ren Zhiqiang, it is up to the individual’s abilities, opportunities and other factors. Young people buying homes is not matter of “should”, but a matter of “can.” Everyone has the right to pursue their own happiness, though most young people cannot afford a house, but there are a small number of elite young people, through their high degree of competence and hard work, they can buy a place to live in the big cities…

[From Sina]

20091204-young-people-house-02

Some people say life is full of surprises, just like Ren Zhiqiang’s mouth, you never know when and where he will make some shocking statements. Not long ago, when the hot discussions on housing prices and housing slaves are just settling down, Ren fires again. Young people should not be able to afford houses? Owning a house and a car is a dream in the United States. If even to the developed country like the United States it is a dream, and in China, a 30-year-old can already achieve this dream, it should mean that China’s spending power and consumption mentality are way ahead of developed countries. China’s houses are too cheap.

Netizens looking for new topics to talk about were immediately riled up, heated debates started fast and furiously.

Supporting views

How could they afford houses

After long and deep contemplation, I cannot help myself but to admire Ren Zhiqiang. This time he spoke the truth!

First, housing prices are so high, how can young people afford houses? Even if they become the elderly, there are not many people who can afford to buy. There was news that reported seven to eight thousand people fighting over 200 houses. The fact that it cost 100,000 yuan just for a ticket to be able to buy a house became the hottest topic in Hangzhou. You should know if the housing prices are not high, no one will fight for affordable housing. People who are fighting to buy houses are not all young people, what they are fighting for are not high-end villa commercial housings, but the affordable housings.

Secondly, if income cannot keep up (with the housing prices), how can young people afford houses? For example, twenty-some university graduates, are generally paid less than 2000 a month. Obviously, most young people cannot even afford to buy 1 square meter with one-month salary. According to such calculation, if the young person wants to buy a 90 square meter home, without eating, drinking and playing, he needs to continuously work for 8 years. Then after 8 years the young person is not “the young person under 30” any more.

- Deng Ziqing (邓子庆)

Chinese-style truth

Ren Zhiqiang is the kind of person that “three days without firing a cannon will make him restless.” However, despite the fact that what Ren Zhiqiang said was all virtually false reasoning, if according to “time is the sole criterion for testing the truth” then is what Ren Zhiqiang said false reasoning or Chinese-style truth? From the beginning, how many times was Ren Zhiqiang wrong? For example he said “There must be stored land for real estate, because there will be no panic only if there is food stored.” For some time, how many examples of huge profits due to storing land have you seen already? For example, he also said “The purpose of the macro-control was not to let prices fall, but to have steady growth.” Isn’t the housing price continuing to increase, with more regulations? Even the international financial crisis is in no way affecting the boom. For example he also said, “Whoever did not buy a house all suffered losses…”, “Real estate should have huge profits.” And “High-end houses are not meant for poor people to afford.”

This time, he claims “China’s young people should not be able to afford houses”. According to the standards provided by the United Nations, if the price of the house is 6 times the annual household income, then the people should have the ability to purchase a home, and real estate market is able to balance the supply and demand. But young people will fall in love, get married, have kids, even and regular life has many expenses, then how many years do they need to save in order to buy a house? Don’t even mention here the place where I am at, buying a house requires both spouses’ net incomes for two or three decades, right?

-Liu Bing (刘兵)

House slave’s mentality should have been put in order long ago.

Ren Zhiqiang, while having the motive of speaking for personal interests, however in many cases, although some of his remarks “choke people”, they are not necessarily nonesense. In comparison with those commentators that are full of lies, empty words and clichés, Ren Zhiqiang’s jarring voice may be more valuable. For example, in respect of young people should not be able afford a house I do not think there is anything wrong with this opinion. Like Ren Zhiqiang says, people under 30 just joined the work force, do not have financial abilities, the fact that they cannot afford a house is normal. But the reality is, as pointed out, quite the contrary. Almost all of the young people are purchasing homes at the expense of their parents and families.

The housing market in China is so red hot because of people’s excessive pursuits. With the abnormally high prices, becoming a “house slaves” is an inevitable option. But if you come back and think about it, it is precisely this impulsive buying frenzy that added fire to soaring housing prices. So maybe we should face Ren Zhiqiang’s jarring “big truth”. At the very least, these words reveal the reason behind the disorder and housing market bubble, it also reflects the irrational housing consumption. In fact, while criticizing the current high property prices might bring oneself to become a miserable “house slave”; at the same time, these “house slaves” also hope for housing market to continuously to move up, so that their own property increases in value. This is the conundrum of the house slave’s mentality, which should have been put in order long ago.

-Chen Yizhou (陈一舟)

Opposing team

Don’t use U.S. home prices

Ren Zhiqiang talks about U.S. home prices. Let us take a look at the real U.S. home prices. In October this year, the latest data released by the U.S. Commerce Department showed that U.S. new home sales in September this year, the median price is 204.8 thousand U.S. dollars, equivalent to about 1.4 million RMB. Looking at the current prices, 1.4 million yuan maybe can buy you a house in the mid-west, but in Beijing, Shanghai and major cities 1.4 million getting you a empty 2 bed room is already a stretch, don’t even think about a renovated new house.

This is just the absolute price comparison, if we look at price and earnings ratio, prices are not cheap in China. Take this data as evidence: in 2008 the average income is 37.6 thousand dollars (ranked 4th in the world). China’s 2008 average income is 1100 dollars (ranked 109). The U.S. income is 34 times of China’s income. Although in the U.S. those buying a home have to pay property tax, the U.S. does not restrict the real estate ownership to 70 years. It is also true that young people in the United Sates may be in no hurry to buy a house, but this does not mean that young Americans cannot afford housing. This shows that Americans have different approaches on their spending, but it also shows that U.S. has a better housing system, even young people that do not buy their own home can also have decent places to live. How did Ren Zhiqiang form the conclusion of China’s housing prices are too cheap and the Americans cannot afford housing?

-Ye Zhuyi (叶祝颐)

The truth behind fallacy

“Young people should not be able to afford houses” is a simple argument. This argument has two problems with it. First, if young people cannot afford houses, where should they live? Second, if young people cannot afford housing, will they be able to afford housing when they are middle-aged?

Ren Zhiqiang ignored an issue: in the West, there is basic affordable living system in place. But in China, how many affordable houses are there for rent? Even in the cities, the supply of affordable housing for rent far exceeds the demand of young people of low-middle income. Common people all know how to calculate: renting is costly, and buying a house can guarantee an increase in value. So, is it more worthwhile to rent or to buy? And, if young people cannot afford houses now, when they are middle-aged and older can they afford it then? How much is the total housing worth in China? Statistics show that the total value of housing in china currently is 90 trillion yuan, which is nearly 200% of GDP. While urban residents need to spend nearly 22 years of wages (without eating or other expenses) in order to buy a home. In other words, in the face of abnormal high prices, even those slightly rich middle-aged and elderly cannot afford houses.

-Hui Mingsheng (惠铭生)

What’s the point of kissing up to middle-aged people?

There are tons of comments accusing Ren Zhiqiang, the public may understand, but Ren Zhiqiang does not necessarily understand. What does Ren Zhiqiang do? He builds houses and sells house. Building and selling homes is a business, offending consumers is like cutting of source of income. A real estate giant even if is as rich as Bill Gates, would not be stupid enough to ignore the consumers. However Ren Zhiqiang is clever, he despises his own potential customers, underneath his shocking words, exposed his wisdom, small wisdom that is. He is bullish and favors the middle-aged who have the true power of consumption, therefore he is willing to bear the danger of public criticism and thus openly insults young people.

Lets set aside the issue of if young people have the rights to buy a house or not and let’s just talk about if they can afford a house. Ren Zhiqiang’s point of view is harsh to young people, he is not qualified to be a businessman. This is clearly slapping his own face: as long as there is more than one young person who bought a house, according to Ren’s logic, should these young people who have bought a house be considered outrageous? If they do have the rights of housing consumption, then isn’t Ren’s speech unreasonable and illogical? If you bash your own potential customers, unless you change your business, how will you survive in ten years?

-Liu Haiming (刘海明)

Voices

Selective statement without holding back

What was coming out of Ren Zhiqiang’s mouth is the truth, the reason people are dissatisfied with it is because he says he is “speaking out without holding back” but he is actually being selective in what he says. He only chose to mention that young people are inexperienced and the lack of “reasonable premise” for them to buy a house, but he deliberately failed to mention China’s housing price bubble.

12/3 Yianzhao Metropolitan Daily

Too many issues covered up

Young people should not be able to afford a house, this is a correct statement but it covers too many issues. And these issues are connected with young people’s lives. First, this statement covers up the abnormal rental housing market. Secondly, this statement avoids the issue of young people being able to fulfill their rights. This statement also avoids the issue of home prices are already being too high.

12/3 Chongqing Daily

 

What are your thoughts on Ren Zhiqiang’s view?

17 Comments | Leave a comment | Comment feed

  1. jay says:

    Wow this guy is commie to the core. I feel sorry for his family.

  2. Uln says:

    Very interesting. I see why netizens are mad at Ren, but still many of his points are worth discussing. Especially the fact that for young people it “should” be difficult to buy an appartment, and his comparison with the US and other developed countries

    Actually, what is really interesting of this debate is that: it is a rare case where Chinese people’s problems are exactly the same as in developed countries. At least back in Spain, where I have closest experience, the rising prices of real estate, the corruption in the industry and the difficulties for young people to buy an apartment are probably the N.1 subject of discussion. This all sounds so familiar to me!

  3. Samuel says:

    i must say i agree with most of what’s been said. however it is unfortunate that there is a conflict of interest since the guy is a businessman and he makes his money from selling homes. from what i have seen, i believe it is a combination of many factors, the most significant being chinese people are better able to determine that owning is more cost efficient than renting, compared to their american counterparts. (I don’t think the consumerism mentality has anything to do with buying a house, since no one has the resources to pick up homes left and right.) also societal pressures play an important role. nowadays females who look for potential husbands primarily consider two things: “does he own a house?” & “does he have a car?”. that being said, i still have no idea how young people in china do it. i can see all the young business owners and entrepreneurs owning property but what about the average college graduate? (the salary figure of 2,000rmb/month quoted for the average college graduate is fairly accurate.) i would assume it’s mainly from parents. bank loans? does china even have such a system of credit set up?

  4. Sweet America says:

    This Ren Zhiqiang has a couple of screws up in his head loose. Prices in China are close or even higher in some cases than back at home. I really don’t know how the so called “rising middle class” afford the prices of property in China.

    Even I think it’s hard for me to by one. Guys a fucking tool, from what I’ve read.

  5. Alex says:

    I note how he avoids basic issues, like how ‘house’ in the West refers to an actual house (and garden) that can be freely expanded and maintained while in China it usually refers to a section of a concrete block that is unlikely to last 30 years where the property management company will deny any attempt to modify the property unless a substantial fee is paid.

  6. Kage Musha says:

    Let’s see. 26 here. Worked for couple of years (3?) Bought an house recently.
    Same with co-workers who have worked around the same years.

    Oh and I’m located in Western Europe.

    Maybe people shouldn’t aim too high and be content with a small(er) house and after they’ve worked more, are earning more switch to a big(ger) house.

    • xmq_jpm says:

      what you must mean is: after working three years as a hedge fund operator and earning fat bonus checks, you were able with a little help from your parents to ask the bank for a 25 year loan to buy a 50sq m house in the remote Portuguese countryside, am I correct?

  7. Uln says:

    Hmm. I think the first thing we have to do is stop speaking of “the West” and start speaking of particular countries or even regions, the situation is completely different in each place. I dont know where you come from but I can tell you in Spain, many Eastern European countries also I guess most of South Europe it is very difficult and very unusual for a 26yo to buy an apartment, let alone a house with garden like Alex suggests..

    Which is not to say that I agree or even like Mr. Ren, but just that he does a good job of defending his point. And he is not hiding the fact that he is an interested part in this, so you cant blame him for that. (probably he can be blamed for many other things, but speaking clearly and bringing forth 15 points for discussion is not one of them)

  8. Jing Daily says:

    A lot of it just comes down to cultural practices. These younger Chinese who are buying homes often are bankrolled (at least in significant part) by their parents, whereas in the US — rich parents aside — most parents feel it is their children’s responsibility to buy their own houses and make their own way.

    • bert says:

      Too general. I know people in the US who live in a house bought by their parents and people under 30 in China who have bought their own home without the parents help. It is about money, not culture.

  9. Well, this article is the freshest on this notable topic. I concur with your conclusions and anxiously await your future updates. Just saying thanks will not be sufficient, for the great clarity in your writing. I will immediately grab your rss feed to stay abreast of any updates. Admirable work and much success in your business endeavors!

  10. Happy says:

    Happy Holidays Everyone! All the best for the New Year.

  11. JeffGoh says:

    As an overseas born English educated Chinese, I have always been proud of being Chinese and the country of China because of the long rich history and culture. There are a lot to be valued in traditional Chinese Customs and traditions and know how.

    It saddens me to see the property bubble now happening in China. I have seen many property bubbles in many countries. The aftermath of property bubbles is destruction of wealth of its citizens and prolong slavery of the working Class. It is unfortunate too at this juncture, because China today is one of the very few countries in the world that is on the path of Nation building for its people and country. Most countries from USA Europe and Asia are being plundered by politicians and their cronies corporations.

    However, going by the track records of President Hu I am confident that he will contain this explosive problem. The seed of this problem is – Americanisation – a social warfare to plunder and impoverise citizens. Many countries have suffered because of this onslaught, and are still paying the price today.

    If I may add, I hope China will be very cautious in opening up its financial sector to the super crooks. That is the ultimate prize that these crooks are after. I am very sure President Hu is more than well aware of this, and I am sure he know what to do.

  12. If you are living outside the USA and would like to own a share in the ‘big corporation’, then take a serious look at tax deed sales. Buying a tax deed presents very little risk, as most of the liens attached to a property are wiped out at the tax deed sale. Many of the steps to owning a tax deed property can be conducted from your own home via your computer. Find a US-based associate that is willing to act for you as a bidder, and you will soon own some of the USA! Tax Deed Treasures is developing a property trust of affiliated US-based investors, designed with the international investor in mind, and is assisting interested international parties with LLC formation, US-based registered offices and bank accounts, to help interested investors conduct business in the USA.

  13. Hi blog owner, listen, can you be found? I was searching for one on facebook but could not find one.I would really like to become a fan!

  14. There’s definately a lot to find out about this topic. I love all the points you’ve made.

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