Caught In The Housing Trap

As regulators grapple to keep a lid on soaring housing prices in big cities, some people sign up for the debt treadmill and others decide to just get on with life. Yang Yang reports.

A 2 million yuan millstone hangs around the necks of Wu Jian and his wife, and yet they consider themselves lucky. That amount, equivalent to $290,000, is how much Wu, 28, of Beijing, and his wife owe a bank and their relatives after they borrowed money to buy a 60-square-meter apartment in the city last winter.

If Wu and his wife were on an average salary in Beijing of a little less than 10,000 yuan and each contributed half their pay toward repayments, they would finally discharge their debt by about 2035. However, that calculation ignores any interest they have to pay, which could stretch their burden by quite a few more years.

However, Wu said he feels he had no other choice other than to buy into the Beijing real estate market.

He bought the house because he was getting married, he said, and his wife is now expecting a baby. In fact he had previously not expected to buy a house so early because the deposit, 1.5 million yuan, would usually be far too much for a young couple under the age of 30.

"The baby is due soon, and we wanted to stay in Beijing, so we just had to," he said.

One reason Wu and his wife consider themselves fortunate to have gotten on the real estate escalator is that since they bought their home, housing prices in the capital have continued what seems to be an inexorable rise.

The real estate agent fang.com says the average price of a home in Beijing grew from 56,000 yuan a square meter in October to 63,000 yuan a square meter in March, an increase of 9 percent.

By contrast, Zhilian Recruiting, a China-based website, said that between winter and spring, the average salary in the capital rose from 9,835 yuan to 9,942 yuan, an increase of 1 percent.

What this means is that buying a home in Beijing is increasingly out of the question for many young people unless their parents or even grandparents help them financially, and they borrow from relatives and friends in addition to banks.

Beijing had a population of 21.5 million in 2014, the Beijing Statistics Bureau said, about a third of whom were aged 20 to 34, many of whom attended college at local universities or in other cities. They are some of the most talented people the city has.

Haidian district, in the city's northwest, is often cited as the epitome of the housing affordability problem. The exorbitant prices and continuing increases are driven in large part by parents keen to have their children attend top primary and middle schools in the area to increase their chances of being accepted into top universities such as Peking, Tsinghua and Renmin universities, which are all located in the district.

An anecdote that has recently been doing the rounds tells of a taxi driver and a passenger getting into a conversation about the price of housing, whereupon the driver puts this paradox to his passenger: If graduates from the likes of Peking University and Tsinghua University do not earn enough to be able to afford a house in Haidian, why then bother buying one?

Many of those who have read this account online have given a nod to the taxi driver, and public resignation to the idea that there is no stopping the price rises has given way to bleak pessimism that for young people from middle-class families on just average incomes, homeownership will forever remain a pipe dream.

Wu Nan 28, a journalist, said: "People, especially friends and relatives back in my hometown, use housing as a gauge of your success. If you don't own a home you are regarded as a loser. Added to which, a man like me is disadvantaged in the marriage market."

Starting a family

All this raises the question of whether anyone wanting to start a family will be forced to leave Beijing. If they opt to stay, will these people be so preoccupied with making ends meet that they have no time or passion to improve society in the many different fields in which they are engaged?

In short, will soaring housing prices suck the vitality out of the nation's capital?

The Wu couple said they are not bothered about the impact debt will have on their careers and their lives generally.

"So that we can pay off the debts to our relatives as soon as possible and save enough money for unexpected situations like unemployment, we will spend less on entertainment, such as dinner parties and movies," Wu said.

"Another thing is that we cannot quit our present jobs unless we have something else lined up. That's the kind of freedom we have lost by buying the house, but it means our baby can grow up in a stable environment, and for that it's well worth the price."

In any case, "constantly changing houses is a bad thing for children," he said.

As for employment, Wu said salary is just one important element, another being whether a job fits into a lifelong career.

Lucky couple

Gwen Zhu, 31, said the Wu couple are undoubtedly very lucky, and certainly a lot luckier than she is.

Zhu, from Jiangxi province, entered the Institute of Remote Sensing and Digital Earth, part of the Chinese Academy of Sciences, in 2009, aiming to obtain a doctorate and eventually embark on an academic career.

Staying at the institute would also have given her the possibility of obtaining the hukou, or registered resident permit, she said.

However, in 2010 she changed her mind about her career path, based mostly on how little she would be paid if she worked in academia, she said. So after graduating she joined a fund company in Beijing, where she trained in the field of communication stocks.

The Beijing government, as part of measures to control the price of housing, now demands that buyers possess the hukou, in the absence of which they would need to have worked in Beijing and paid social security contributions for a minimum of five years. But relying on that rule would have been futile for her, Zhu said, because in five years, rising prices have pushed housing increasingly out of her reach.

"I really should have tried to get a job at the institute so I could get a hukou. But the pay was too low, and it's especially difficult to achieve academic success in China. Anyone who aspires to become a scientist is more likely to choose to go to countries like the United States, where an ordinary research scientist can live a reasonable life on a decent income."

One of her fellow senior students at the Institute of Remote Sensing and Digital Earth got a position there after graduating with a master's degree, but she quit recently and began working for Homelink, the largest real estate agent in China, selling houses, which "really shocked me," Zhu said.

"It's not easy for a student with only a master's degree to get a position there. She is outstanding, but the salary is too low, especially when you look at soaring housing prices."

For Zhu, continuing soaring housing prices point to class solidification in Beijing, meaning that the less well-off will be excluded.

"It has become normal that graduates from Peking and Tsinghua universities cannot afford a house in Beijing. There are many good universities in the city, but not every graduate can stay here. The bar is rising."

Those aged above 30 who have started thinking about starting a family but cannot afford a house will have to move to other cities, Zhu said.

Moving around

In 2015 Zhu Hangtian, now 33, resigned from his position as an administrative staff member at a university in Beijing to take up a position at a superconductivity research center at the University of Houston in Texas. However, the two-year contract for that position ends in October, and Zhu has begun to fret about his future.

"Perhaps I will try to stay in the US because housing in Beijing is just too expensive. There seems to be nothing you can do about it.

"In Houston, even on an ordinary kind of salary you can buy a house in several years and maybe another later, and I hope to live with my parents at least in the same city to look after them. But in Beijing it's completely impossible."

If he chooses to work in Beijing, then his parents may have to stay in their hometown in Henan province, he said.

Du Debin, a researcher at the School of Urban and Regional Science at East China Normal University in Shanghai, said the attraction of cities such as Beijing and Shanghai is their abundance of creativity, educational institutions, the opportunities for doing research, the availability of skilled people and progressive companies.

The resulting demand to live in those cities then helps push up the price of housing there. That benign cycle turns malignant as housing becomes unaffordable for many, and talented people are forced to live elsewhere.

"In that case, it turns out to be a good thing for the development of other cities, as with the economic integration in Beijing, Tianjin and Hebei," Du said.

"But you can gauge whether housing prices in a city are too high by looking at how many skilled people are coming to it and how many are leaving. If more are coming than going, then housing prices are not too high."

Rental services

Unlike people like Gwen Zhu and Zhu Hangtian who are preoccupied with the bleak side of high housing prices, many young people from other cities who are living in Beijing are philosophical about the issue.

"I love movies, cooking and museums," said Liu Zhenhui, 30, who works for an internet company.

"A lot of other people in Beijing happen to love these things, too. So we form different hobby groups and you can meet like-minded people everywhere, which I think doesn't happen so much in other cities.

"I know I can't afford a house, so I just don't think about it. You might as well just enjoy life. But I do think house rental services in Beijing need to be better managed. Otherwise, our rights cannot be guaranteed."

Cecily Shi, 30, who works for a video game company in Beijing, said she had to move early because her landlord decided to sell the two-room apartment she rented.

Shi moved to Beijing from Guangxi Zhuang autonomous region 13 years ago to attend university and has worked in the capital since she graduated. She has seen many good friends leave Beijing, she said.

"If one day housing prices are so high that I cannot even afford to rent, I will leave Beijing, but I don't think this will happen."

Housing in her hometown of Nanning, capital of Guangxi, is not exactly cheap either, she said.

"But when I compare the two, Beijing is a city where I feel free," said Shi, who is single. "You can meet all kinds of people, make good friends and live however you like without being watched and pressured by parents and relatives."

Housing may be expensive, she said, but for many young people it has many attractions, such as tolerance, the possibility to compete on an equal footing with others, a colorful life and better job opportunities.

For Bill Li, 23, it was pollution rather than the cost of housing that was a big issue for him after he came to Beijing in 2014.

He came to the capital seeking an internship with an internet company and says he was ambivalent about the cost of housing.

"I don't care about housing prices at all. I feel no urgency to buy a house at all, especially in Beijing."

Eventually he decided to move to Hangzhou, Zheijiang province, after graduating because of a cough he could not shake off, he said.

"But if I got a chance, I'd love to go back to Beijing because of the great friends I've made there. ... If I get married I don't mind renting a house if my wife is OK with it. I know a couple whose rented house looks very cozy. So why not?"

The average price of a home in Beijing grew from 56,000 yuan a square meter in October to 63,000 yuan a square meter in March, an increase of 9 percent.Photos By Song Niansheng And Long Wei / For China Daily, Kuang Linhua / China Daily