July will see the introduction of a new house-ownership scheme under which the government shoulders up to 50 percent of the cost. Yet locals fear it is just a PR stunt.
The regulation addresses the long-overdue issue of disproportionate property prices in comparison to average income, and will see government supplying funds for the purchase of homes in return for “shared property rights”, the private individuals are then able to pay back the government to slowly acquire the full property rights.
This type of government support was first introduced in China in 2007, with Jiangsu’s very own Huai’an becoming the pilot city to test the waters. Since then, the scheme has been rolled out in a number of cities nationwide and now has finally reached the property hotbed of Nanjing.
Impossible Leap onto Nanjing’s Property Ladder
That something had to be done in order to help Nanjing’s residents on to the property ladder becomes obvious as soon as one takes a look at the increase in property prices over the past few years. Real estate research and consulting company Wangshang, who sits under the house365.com property giant, published a report indicating that over a five-year stretch, from 2010 to 2014, Nanjing’s housing prices increased on average by 30 percent. Research covered Nanjing’s core districts plus Jiangning, Pukou, Gaochun and Lishui.
Du Lei, a reporter for Chinese newspaper Modern Express id some further digging on the subject and revealed that one of the highest increases in property value between 2011 and 2014 in Nanjing occurred in Xianlin, at the Vanke Golden residential area. Starting off at a ¥10,000/sq m four years ago, the value had risen to ¥14,000/sq m by last year, an increase of of 40 percent. Considering that in 2014, the average disposable income for Nanjingers was just over ¥42,560 per year, an increase of 8.8 percent compared to the previous year, that jump onto the property ladder is becoming a more and more unrealistic leap.
House Ownership is a Must in China
Yet it is considered almost impossible not to make that scary financial commitment of an own home in China due to a number of socio-cultural factors. The major drivers for locals to want to become home owners are competitiveness on the marriage market on one hand and financial security on the other. The fact that young men often have to own a house in order to attract a Chinese bride is by now family common knowledge. Nanjing Expat previously reported on the immense pressure, financially and emotionally, under which this puts local young men.
The second reason for buying property is considered a must lies in the lack of a secure and satisfying pension and healthcare system. For many people, owning a house means if they fall seriously ill, they will be able to afford the drastically high medical bills through selling their property.
Who is eligible for government support?
Of course not everyone qualifies for this type of government support. The “Fuerdai” children with rich parents are unsurprisingly not going to eligible for the generous chunk of money handed out by the executive branch.
Four interest groups qualify for the assisted property purchase system:
- Urban low and middle income families facing housing difficulties with a hukou for the six core districts in Nanjing (Qinuai, Yuhuatai, Qixia, Jianye, Gulou, Xuanwu)
- Residents (by hukou) of the six core districts who are neither property owners nor involved in business transactions.
- Residents (by hukou) of the six core districts who are neither property owners nor involved in business transactions.
- Other parties designated in need of support by the municipal government.
Certainly there are additional requirements to meet in order to qualify for support, i.e. the hook has to have been held for at least five years, the family’s disposable income, size of the purchased property, financial assets and number of cars owned all need to be below a certain threshold to be set by the government.
Finally, there are a number of further restrictions which cause residents not to be eligible for financial help from the government.
- Having received relocation compensation for Nanjing within the past five years.
- The local hukou was acquired via house purchase.
- Recipients of affordable housing benefits.
- Any other circumstances as prescribed by local government.
If one qualifies for the scheme, the size of the property depends on the size of the family. For single people the allowed flat size lies at no more than 45 sq m, while two-person households are eligible to up to 55 sq m, and finally three-person households and above have a right to 65 sq m.
Nanjingers React Sceptical to Government’s Housing Scheme
While this certainly looks like good news, it seems the (wo)man on the street views this step with a lot more cynicism and realism.
There are those who remember a time when things were much better in relation to house ownership. “Back in the 80s, nationalized companies would provide their employees with free accommodation,” points out a Chinese immigrant to Austria who wished to be known as Red Scarf. The housing market has probably seen the most worrying development under China’s new socialist regime.
“I think this is just an excuse for the government to build more houses,” explains Martin Young, a young professional and born and bred Nanjinger. “In the end, the houses we “buy” are actually only rented for 70 years, they still belong to the government. A lot of assisted housing properties are now impossible to sell. The continuous construction of new property is meant to keep the real estate bubble from bursting, the economy from collapsing and inflation from rising. If the government really wants to help people who do not own houses, they could simply purchase existing property and rent it out at a very low price.”
“While this policy could in theory help many people, the income restrictions mean that many young employees such as myself will not be able to make use of it”, observes Daniel Yan, import assistant at an international heating systems business, pointing out the futility of the plan.
An inside source from the government itself gives the policy the final blow. “Probably those people who qualify for this new scheme are not even able to afford the half that remains for them to pay,” calling into question whether this is more of a publicity stunt to appease the masses rather than an actual, effective measure.
How successful the scheme will be only time will tell, after all there are certainly a number of open questions and kinks to be worked out. While this definitely seems like a step in the right direction to alleviate the financial pressures on the local populace and work against a potential housing crisis, it seems that locals are less than enthusiastic about what might in the end be a mere PR stunt. We look forward to finding out whether the government will win over more supporters when the policy is introduced in July.
