Market Watch

Lipstick on the China Pig

If you think China doesn’t have its own issues you might want to think again. The mortgage market in China is downright scary (imagine politicians deciding budget consumption with a game of hungry hungry hippos). Housing debt in China noted by Bloomberg HERE.

Sheng is part of a generation of middle class that Chinese media has dubbed “fang nu,” or housing slaves, a reference to the lifetime of work needed to pay off their debts. They’re taking on mortgages even as the government maintains property curbs to damp prices that have almost tripled since China embarked in 1998 on a drive to increase private home ownership.

“It’s a treat for myself because I could never afford such a luxury after I start repaying my housing loans next month,” said Sheng, who paid 1.1 million yuan for the one-bedroom apartment on the city’s western outskirts and will be using about 70 percent of her salary to service her mortgage.

Chinese homebuyers typically use 30 percent to 50 percent of their monthly incomes to repay mortgages, said Wu Hao, a manager at the loan brokerage of Bacic & 5i5j Group, Beijing’s second-biggest realtor for existing homes. It advises clients to keep monthly repayments lower than one-third of their incomes.

Cai Yue, a 33-year-old manager at a Shanghai-based pharmaceutical company, bought her first home 10 years ago after graduation, among the first wave of Chinese taking out mortgages as the government tried to encourage home ownership by offering income tax rebates and the cheapest funding in two decades.

Cai borrowed 50 percent from the bank for her 300,000 yuan apartment in 2003. Her monthly payment was 1,600 yuan, about 40 percent of her salary at the time.

“It was quite a modern idea to take on a mortgage back then,” said Cai, who earned 3,700 yuan a month back in 2003 and declined to disclose her current income.

Remember, we have ghost towns. They have ghost cities. No shit. Entire metropolitan cities build with no one in them. And you thought our housing bubble was bad. Check the video HERE