Rising Home Prices Send China’s ‘Rat Race’ Scurrying Underground
By Koh Gui Qing & Aillen Wang 6 January 2014
BEIJING — Zig-zagging left and right through a maze of dark, narrow corridors in a high-rise’s basement, 35-year-old kitchen worker Hu has joined the many thousands of Chinese fleeing fast-rising property prices by heading down—down underground.
Hu lives here beneath an affluent downtown apartment building, in a windowless, 4 square-meter (43 square-foot) apartment with his wife. For 400 yuan (US$65.85) a month in rent, there’s no air-conditioning, the only suggestion of heat is a pipe snaking through to deliver gas to the apartments above and the bathroom is a fetid, shared toilet down the hall.
“I can’t afford to rent a house,” said Hu as he showed off his meager appointments. Living in basement apartments isn’t illegal in China, but like anywhere else it is nothing to brag about and Hu, who guts fish for 2,500 yuan a month at a popular Sichuanese hotpot restaurant on the street above, declined to provide his given name. “If I weren’t trying to save money, I wouldn’t live here,” he said.
Locals have dubbed Hu and his fellow subterranean denizens the “rat race”—casualties and simultaneously emblems of a housing market beyond the government’s control.
Despite efforts to discourage property speculation and develop affordable housing, a steady stream of job-seekers from the countryside and a lack of attractive investment alternatives have kept prices soaring. Residential property prices rose 10 percent in November from the same month of 2012, according to data released last week, and have been setting new records every year since 2009. Prices in Beijing are rising even faster—16 percent a year—with rents climbing 12 percent a year.
That’s pushing more and more newly arrived urbanites underground. Of the estimated 7.7 million migrants living in Beijing, nearly a fifth live either at their workplace or underground, according to state news agency Xinhua. Beijing’s housing authority refuted this statistic, saying in an e-mail to Reuters that a government survey last year found only about 280,000 migrants living in basements and that only a small percentage of Beijing’s basements were being used as dwellings.
Last month, authorities sealed Beijing’s manhole covers after local media discovered a group of people living in the sewers below, with one, a 52-year-old car washer, reported by the local media to have been living there for at least a decade. The sewer dwellers were relocated and those not from Beijing sent back home.
Surging residential prices are both boon and bane to the government. China’s booming property sector accounts for roughly 15 percent of GDP and heavily indebted local governments rely on land sales—selling land earns them roughly three times what they collect from taxes.
But rising prices are putting home ownership farther out of reach for most Chinese, worsening the gap between rich and poor and breeding social discontent.
“Some people can buy several homes, some people can’t even buy one,” said Mao Yushi, co-founder and honorary president at the Unirule Institute of Economics, an independent think tank in Beijing. “There will be an impact on society.”
The government has responded by restricting home purchases and boosting the supply of low-cost public housing. In Beijing, the total floor space of public housing rose 20 percent in the first 11 months of 2013 from the year before.
But with the promise of employment and education beckoning in big cities like Beijing and Shanghai, the problem appears likely to only get worse. Beijing saw another 316,000 migrants arrive in 2012, lifting its population to 19.6 million.
That has made housing in Beijing more expensive relative to average incomes than in many developed countries. The median price for residential property in Beijing is over $4,500 a square meter, according to property developer Soufun, with rents running at $9.50 per square meter—in a nation where the average annual income is just over $6,000.
That makes Beijing homes almost three times as expensive for Chinese as buying a home in New York City is for Americans, according to Reuters calculations based on data from the World Bank and San Francisco-based property website Trulia. Renting a 1,000 square-foot apartment in China’s capital would cost almost double the average citizen’s monthly income.
Not surprisingly, public opinion polls routinely rank rising home prices as one of the biggest sources of anxiety among Chinese adults. A 2012 survey by the Hong Kong media website Phoenix found that couples in Beijing, Shanghai, Guangzhou and Shenzhen spend on average 42 percent of their combined monthly income on mortgages. Chinese have invented the term “housing slave” to describe those struggling to make hefty monthly mortgages payments.
But with Beijing home prices having risen six-fold in the past decade, according to Soufun, even cheap public housing can be beyond the reach of many, forcing them to seek less attractive alternatives.
In a basement below a block of apartments in downtown Beijing, residents walk stooped to avoid pipes hanging from the ceilings. “This is better than other basements in the area,” said one 26-year-old resident.
The typical basement or workplace apartment is less than 5 square meters, according to Xinhua, less than a tenth the size of the typical Beijing apartment. Fires sometimes break out in basements when people cook—at least three were reported in Beijing last year.
Apartments are so small that Hu said he and his wife have trouble sleeping together in their tiny bed. He has resorted to spending most nights in another basement apartment provided by his restaurant.
His wife yearns for a larger home above ground and in the meantime makes do by decorating the room with plastic bells and flowers that Hu says she finds in the street. Their dream of owning a home remains distant and Hu says basement living has hurt their relationship.
“It’s too difficult to have a house right now,” said Hu. “Every basement has people living in it. See for yourself. There are so many of us out there.”
Additional reporting by Beijing Newsroom and Shao Xiaoyi.