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Sign up with Google Sign up with FacebookQ: Why the price disparity between renting and buying?
Rents are okay in most cities in China...you can rent very nice places for really affordable prices. But as soon as you want to buy something, things go completely nuts, and are sometimes a lot more expensive than even in Europe or the U.S.
Is it because real estate agencies know Chinese have a tendency to buy rather than rent, especially with newly-weds? Is it playing on the cultural belief that you're no good as long as you don't OWN a home.
I just don't get why there's such a massive difference between renting and purchasing a place.
China right now is in the middle of a real estate bubble, and the big question is if it will burst or not. Many developers are in severe need of cash inflow, very much overextended. Bank loans are not getting paid. Supply far exceed demand, yet prices ,if you see any reduction, will be minimal. Somehow in their mentality, if I do not get what I want, I will not sell, let it sit there.
I have a friend who bought an apartment in 2006 for 465,000 Rmb. For him it was an investment, he does not live in it, rents it occasionally (when he can find a tenant). He wants 1.5 million kuai for it, will not lower his price even a jiao. Many here think exactly the same way.
As an example, it will depend on location (city) the amount you will be asked for an apartment. At Pingoo, a city 130 Kms north of Nanning, new apartments do sell now for 2K/sq meter. In Beihai, a coastal city south of Nanning, near the beach area they are asking 12 to 15K. In Nanning the going asking price is 6.5K. And if you look in Beijing, Shanghai, Shenzhen or Guangzhou, it is even higher, I have seen some buildings in the mid 20K/sq meter.
Now, if material cost is about the same, labor involved is also the same, and I will assume land rental cost is the same, why the disparity in selling prices?. Will it be because that is what the market will bear?. I do believe you gave yourself the right answer within your question, and there is no reason for the difference at all.
I's guess your own hypothesis is right: the compulsion for newlyweds to own a house is fuelling the housing boom.
Surely it will bust someday, unless there's a quick and major change in Chinese societal expectations. When it is expected that everyone must marry, they must marry before a certain age, and they must have a house before they marry, unsustainable growth is not a huge surprise.