PROPERTY MARKET IN CHINA UNDER DOLDRUMS

The realty business in China is in doldrums. For last several months, China is said to have more than 200m empty apartments. China has more living space per capita than Europe or Japan so this is not a housing shortage. Given the unprecedented amount of living space, it is hard to see how higher rents have been sticking. The huge stock of empty flats equals not just price, but quantity, bubble, which are less common & shorter than price bubbles. Unusually, China seems to be experiencing simultaneous price and quantity bubbles. If either pops, results could be disastrous, but that outcome can be avoided.

Buyers of new house in China may resort to divorce or postponing marriage in order to save money as per the new housing rules , a report in the Economic Information Daily found.

The central government has announced a new housing regulations recently, under which the down payment requirement for a family purchasing a second house has been raised from 40 percent to 50 percent with the mortgage rate 1.1 times the benchmark interest rate.

Moreover, a much higher down payment and mortgage rate would be required for the third home and beyond.

A couple in Central China's Hunan province found they would have to pay an extra 50,000 yuan and 100,000 yuan as the down payment and loan interest , respectively, under the new regulations, for their estimated 720,000 yuan second apartment.

However, the real estate agents dug out a convenient shortcut for the couple to save the increased 150,000 yuan cost- getting a divorce.

"The home regulations are family-based, thus I can pay a 30 percent down payment and enjoy the 15 percent discount in mortgage rate once I get divorced and become single," the husband calculated, "then we can remarry after the purchase".

Facing similar situations, others are also postponing marriage in order to buy an apartment under the conditions of the old housing policies.

Photo: Internet