But it’s impossible, you see. According to the laws of economics, persons making $400 per mo, slaving away at a Foxconn suicide factory, to make lavish Apple products, cannot buy luxurious condos, unless of course the gov’t looks the other way when it comes to lending.
You know, just like we did from 2003-2007.
The move underscores Beijing’s concerns over a stock of some 1 billion square meters of vacant housing – around 13 million homes or enough to house the population of Australia – and the broader knock-on effect of any defaults by struggling property developers as the world’s second-largest economy grows at its slowest pace in a quarter of a century.
While encouraging migrants to buy homes in lower-tier cities seems like a remedy to boost demand, making money available to them will prove tougher. Many of China’s more than 270 million migrants earn below 3,000 yuan ($462) a month, less than half the cost per square meter needed for a home in a lower-tier city such as Changzhou, in eastern Jiangsu province.
“Conditions are not mature for migrant workers to buy unsold homes. You can’t count on a certificate for housing ownership to resolve everything,” said Jason Hu, head of research at Chinese property consultant Holdways in Beijing.
“Everyone wants to settle in the city, but where’s the money?” said Hu, adding other issues need to be resolved such as giving migrant workers equal access to social security and public services.
Authorities aim to get 100 million migrants to settle in cities by 2020, and officials in small-and medium-sized cities have pledged to give permanent resident status, or hukou, to more rural people, although access to welfare remains a concern.
Another potential obstacle is that more than 70 percent of migrant workers already living in cities prefer to rent, according to National Health and Family Planning Commission data.
“If I can earn enough I’d go back to the city near my hometown and buy a home there,” said a restaurant worker in Beijing who gave just his surname of Long. “Prices here are too high, it’s impossible for me to settle here,” added the 26-year-old who left his village in central Hunan province five years ago.
With home ownership still a distant dream for most low-income migrant workers, the challenge is to make homes more affordable.
“I’m not sure what the government could do to ‘encourage price cuts’ unless it’s going to subsidize them,” said Yin Chin Cheong, a Singapore-based analyst at CreditSights.
Some developers welcomed the move, saying the proposal is part and parcel of China’s urbanization process.
“It would stimulate demand for housing. But these are not temporary measures to run down inventory, they are part of a long-term urbanization,” said Fan Xiaochong, vice president of Sunshine 100, a developer focused on second- and third-tier cities.
While parallels have been drawn with the U.S. subprime crisis, which was also preceded by excess housing inventory, risky mortgages and aggressive lending, some experts shrugged off such a scenario.
“Mortgage penetration levels are lower and down-payments are higher compared with the U.S., and household debt is much lower. So it’s unlikely to snowball into a sub-prime like situation,” said Christopher Yip, Hong Kong-based analyst at Standard & Poor’s.
I love how they say proposals to get 100 million migrant workers, earning $400 per mo, doesn’t compare to the degeneracy of America’s subprime issues of 2007. What was the median income for subprime folks back then? I am sure it was a hell of a lot more than $400 per mo.
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