China home prices thwart buyers

Yang and many other young Chinese are finding their aspirations thwarted by an overheated property market that is enriching already wealthy speculators, local officials and other Communist Party allies.

It's a hard reality for a generation that views home ownership as a given after reforms more than a decade ago created a housing market open to the masses. It's also a challenge for leaders whose reliance on rising property values and land sales to property developers risks letting the market spiral out of control.

The issue is getting top billing at China's annual legislative session, the party's main forum for explaining its policies and responding to public complaints.

“We will resolutely curb the precipitous rise of housing prices in some cities and satisfy people's basic need for housing,” Premier Wen Jiabao pledged in his annual address to lawmakers, China's equivalent of the State of the Union speech.

The government has raised taxes and required downpayments — now a minimum 30 percent for even first-time home buyers — and warned big state companies and banks against speculative, risky investments. But no major immediate changes are expected.

“Chinese top leaders have become more and more sensitive to strong nationwide voices on issues, but the sensitivity is only at the PR level,” says Ding Xueliang, a China expert at Hong Kong's University of Science and Technology.

Rising property prices have underpinned economic growth rates, benefiting local governments that tend to be heavily invested in property development and other related businesses. Land sales often help finance construction projects that are also a lucrative source of income for many officials.

Property prices have risen almost constantly since China set up a commercial housing market in the late 1990s, allowing families to buy, at deep discounts, the low-rent government-owned apartments they were living in.

Since then, real estate has burgeoned into one of the country's biggest drivers of growth, a creator of vast numbers of jobs in construction and related industries and — as elsewhere — a source of much of the country's wealth.

Rising housing prices have benefited many. But younger Chinese hoping to replicate their parents' homeowner lifestyles, and the legions of rural Chinese now moving to the cities, are priced out of the market.

A flood of bank lending meant to fend off recession pushed property sales up 75 percent to 4.4 trillion yuan (US$644 billion) last year, making China the world's biggest property market, by some estimates.

“I really have no idea of what to do about housing prices. Unless you get help from your parents or earn more than 500,000 yuan (US$73,000) a year, you can't afford to buy,” said Shen Junlong, a 29-year-old IT manager at a company affiliated with Shanghai's Baosteel Group.

“Living costs are always higher than what you can put in the bank,” said Shen, whose 160,000 yuan (US$23,530) annual income is about four times the national urban average.

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