How Chinese Property Compares To Australian Property
Australia and China might be worlds apart in terms of their cultures, but both countries put a large focus on building wealth through property and have seen strong increases in house prices in recent years.
As a growing city and a hub for jobs and economic activity, Beijing is not too different from Sydney. So how do these two global cities compare in terms of both price and livability?
Since the early 2000s property in China has surged in value. Led by a booming economy and many people from rural areas moving to major cities like Beijing, property prices have dramatically increased.
Despite the fact that Beijing has a population of 19,612,368, according to the most recent census data, it still trails Sydney on the cost of a home on a square metre basis - but only just.
In Beijing, homes that sold for around 4,000 yuan (AUD$842.50) per square metre in 2003 are now above 60,000 yuan (AUD$12,637.50) a square metre, according to property price data provider creprice.cn.
For a Sydney city apartment, you are going to be paying $14,300 per square metre, which is only marginally higher than what you are paying in Beijing, according to Numbeo.
Over the past 20-years alone, Beijing has grown so rapidly that it is now rivaling Sydney in terms of the costs you might well be paying.
In Beijing, if you wanted to buy a decent sized apartment (approx 100 square meters) with two bedrooms, you would pay around 6.8 million yuan ($1.4 million).
In effect that is comparable to some of Sydney’s more higher-end suburbs such as Manly, Mosman or even Bondi.
If you are looking to buy a two-bedroom apartment in Manly on the Northern Beaches, you are likely going to have to pay around $1.25 million according to Realestate.com.au.
So, in fact, the prices, you are going to be paying in some of the most in-demand areas in Sydney are less than what you might pay for a decent apartment in Beijing. With dramatically different lifestyles.
Beijing suffers from some serious liveability issues such as overcrowding, air pollution and the strain of a huge population on public resources. While Sydney also battles with things like public transport as the population continues to rise, it is no wonder that the lifestyle that Sydney offers, remains well above that of many of the other global cities like Beijing.
There is also a large degree of uncertainty surrounding Chinese property. Under Chinese property law, buyers own their apartment but the land stays the property of China, with purchasers only having land-use rights for 70 years.
It is still unclear as to what happens after these rights expire, but despite that, there has been a huge push in China from people worried that future price increases might be too severe and they’ll be priced out of the market forever.
There is still a remarkable difference in prices between homes in the major cities in Beijing and the rural areas. With many of the younger population, unable afford the sky-high prices that we are currently seeing are forced to either rent or live and work elsewhere.
That is really reflected in the price-to-income ratio in Beijing that sits around 25.5, meaning that a home costs 25.5 times the average wage.
Compare that to Sydney where the number is closer to 9 and still considered high by many measures. It goes to show that the wealth discrepancy in Beijing is particularly high and that property is largely unaffordable.
The property sector in China accounts for approximately 15 per cent of China’s gross domestic product, with the total nearer to 30 per cent if you include related industries. It is a very similar picture to what we see in Australia, so clearly there is plenty of wealth tied to growth in property in both countries.
In 2019, China will take measures to keep land and house price stable, according to the recently-held national housing and urban-rural development work conference. Some cities including Beijing have even started to roll out additional measures to further reinforce property regulation and price stability.
While Sydney’s surging property market has slowed in recent years, thanks in part to credit tightening led by APRA, it still represents good value and a vastly different lifestyle to what you would find in a city like Beijing.
Ironically, the lifestyle and value, were two of the driving factors that led the most recent boom in housing prices in Sydney and Melbourne as many Chinese buyers looked to invest in all that Australia had to offer.