China

China’s economy has slowed slightly  this year... though it’s still the world’s fastest growing major economy.  But China’s real estate market continues to boom... putting pressure on locals to pay the rent.

Rents have risen by an average of 12% in the past 5 years, without wages increasing at the same pace any wage increases.

25-year-old Alicia Yang is a technology analyst at a research company. She’s looking for an apartment to live that’s nearer her job.

She now spends half of her salary to pay for a room in a shared apartment, located an hour by train from her office.

And for the same price, she can get a new place in the city’s business district near her office... but it’s small, with limited natural light.

Tenants have to share a cramped kitchen and bathroom.

“The rents are rising about 10% a year, especially if you live near a subway or one of the city’s new malls. Salaries are not increasing at the same rate. And the problem is that a lot of the places I looked at which are within my budget don’t even have a living room because this has been turned into a sleeping area by the landlord.”

Yang is not alone.

Entrepreneur Hui Han Li recently moved out from his Beijing apartment when his landlord increased the rent by 20%.

”If I think about 2004 and what I paid then for my apartment, I’d say it’s a 100% increase over those past eight years. It’s the consequence of general economic growth that has just gone... I wouldn’t say beyond control... but definitely the government is having a very hard time trying to keep it within limits of reasonable growth.”

The government introduced measures to hold down property prices three years ago.

And based on a recent government survey, Chinese cities reported a slower increase in property prices .... but they are still rising.

And in March this year, the government issued guidelines to tighten its grip on the real estate sector, with higher taxes and increased down payments.

Authorities in Shanghai also told banks to stop issuing loans to individuals attempting to buy a third home. While in Beijing, single residents can only buy one home.

But Li believes prices will continue to rise as the increase is driven by traditional values.

“One of the most important things for a Chinese person tends to be housing. First they want to buy a car and then they want to buy a house, so housing prices are absolutely essential. And compared to housing prices there’s definitely been no salary increase that’s been able to keep up.”

Olia Wang is a respected business journalist at the Beijing-based MergerMarket magazine.

She used to write a lot about the real estate market, and last year she became an investor herself.

She spent nearly a million US dollars on a luxury apartment that she now rents out.

“I spent 8000 US dollars per square metre on a 150 square metre apartment and then rented it out. But the rent I get is 3,200 US dollars and that in fact doesn’t cover my mortgage which is 4,000 US dollars per month.”

Wang hopes her investment will be secure...

“The stock market isn’t very good and the interest from the bank is poor and people see real estate prices in Beijing rising by 10% a year and they want to put their money into houses. People expect house prices to keep rising so they keep buying.”

Alicia Yang continues her hunt for a new apartment...

“The real estate market in China is very hot right now. Even though the government is trying to stop this crazy rise in prices, the cost of apartments keeps rising and that drives up rents too.”

So far the Chinese government’s attempts at controlling house prices haven’t really worked.

In the meantime, others are looking for a salary increase to cope with the hike in rent price.

China’s economic outlook doesn’t look too good now for those looking to rent a decent place to live... like Alicia.

“At my company the annual wage increase is not certain and is usually less than 5 percent and certainly lower than the rise in rent. And now companies are saying that since the economy is not growing as fast as before... there is less room for a wage increase to cover the rising rent.