Buying a home in China
Tuesday, October 4th, 2011It’s unusual for me to post 2 updates in the same week so if you’re reading this one make sure you read the one I posted just a day or two ago. This update is about buying housing in China and most housing here is in the form of apartments in high rise or mid rise buildings. Most of this update was written by Bonnie except for the last 2 paragraphs at the bottom.
Before 1980s, Chinese people didn’t have ownership of the apartments they lived in. All the apartments belonged to the organization they worked with, or in a broad sense, the state, as all such organizations were owned and run by the state. So people paid rent which would be deducted from their monthly pay automatically. The system was regarded as a kind of welfare, so the rent was fairly low.
About 20 years ago, the Chinese government started the housing reform. People were allowed to “buy” the apartment they lived in then at a fairly low price, again, as part of the welfare system. In deciding the prices of the apartment, a lot of factors were taken into consideration, including seniority, whether or not the couple was working in the same organization, position, etc. But people who “bought” such apartment didn’t have the land ownership certificate for that apartment, which meant they had only the right to live in or rent out the apartment. They couldn’t sell the apartment as they wished. This was called half-ownership in China. In the meantime, the government encouraged the real estate businessmen to develop what’s called “commercial apartments”, the buyers of which were given both the certificate for the land and the apartment itself, so the buyers had the right to dispose the apartment as they wished.
Since the old apartments were all “bought” by the old employees, the new employees didn’t have apartments to live in after coming into the organization. Besides, the “commercial apartments” were not well developed yet to meet the demand or were too expensive for the new employees to afford, so another policy was formulated to address the housing issue. The organizations were allowed to build new apartments for their employees on the land that the organizations owned. The funds for building such apartments all came from the employees of the organizations. Since the land was owned by the organizations, the employees didn’t need to pay for the land, but only the construction for the apartment, so the total payment was relatively low; but that also determined that the employees again didn’t “own” the land on which the apartments would be built, so they wouldn’t get the land-utilization certificate. As a result, again they couldn’t sell the apartments they “bought” but only live in it or rent it. If the employees wanted to “sell” the apartments, they could only sell them back to the organization they worked for and the employees could not sell them at the prices they wish or at the market prices. The organization would buy the apartments back based on the prices that the employees had bought them after some fees or charges, e.g. depreciation was deducted. (This selling-apartment-back-to-organization part is so far in theory, not in practice yet as no such selling back is heard of by now.)”
Chinese people believe that apartments facing south are better than those facing north. Those on the first or top floor are not as good as those in the middle floors. So again in determining which employee will have which apartment, a lot of factors will be considered as mentioned before.
By organization here I refer to the governmental departments and agencies, institutions that are owned or run by the state like universities, colleges, hospitals, etc. Private companies are not included in. Since this type of housing program is also a part of welfare system, an individual/couple is allowed to have only 1 such apartment. If both husband and wife of a couple work for such organization, even in different organizations, they can’t own such apartment from different organizations. In practice, if say the husband’s organization will build such apartments and the husband would like to get one such apartment, he’s required to present the note issued by his wife’s organization that proves that his wife doesn’t have any such apartment in her organization or that such apartment his wife used to have has been “returned” to her organization.
Commercial apartments are a different story. People can buy commercial apartments outside their organizations in addition to the apartments they’ve had from the organizations. They can have the total ownership of the commercial apartment, including the land-utilization certificate. But such ownership can last only for 70 years. After 70 years, these apartments will theoretically be owned by and at the disposal of the state. But so far nobody knows whether that will happen as the first 70 years is not due yet. It’s likely that the policy will be revised before that.
Bonnie and her mother purchased a “half ownership” apartment several years ago from her mother’s former employer which is a state owned construction company. They paid the deposit in 2001 or 2002 before construction started and made the final payment in 2004 about the time construction was finished. New apartments here are not finished when you buy them. You have to arrange for yourself for the electrical, plumbing, fixtures, kitchen appliances, water heaters, air conditioning/heating (if you are rich enough to have it), flooring, etc. They paid about $12,500 at current exchange rates to purchase the apartment and another $6,500 to finish it and furnish it. It is a 3 bedroom/1 bath unit with about 800 square feet of interior space and has a small storage room in a separate location downstairs. It’s comfortable enough for her mother and I also would be comfortable living there after adding heat and air conditioning.
Bonnie is in the process of buying a “half ownership” apartment from her employer (the university, which is a state organization). She made a deposit last year on a 4 bedroom/2 bath apartment on the 18th floor of a building that will be constructed on campus. It will have about 1600 square feet of interior space. The cost of the apartment will be about $50,000 plus we expect to spend about $32,000 to finish and furnish it. Thus the total cost will be around $82,000 vs. a similar commercial apartment cost of about $160,000 which is a relatively high end apartment. She expects that the apartment will be ready for us to take possession of sometime in late 2012 to mid 2013. That will be our residence after it is completed. Until then we will live in my rented apartment although she will continue to stay in her dormitory room on campus when she needs to be at school since my apartment is on the opposite side of town far from the school.
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