According to a large-scale survey conducted in China, residents devote three-quarters of their savings to real estate investment, almost twice as much as in the US. Total mortgages on unoccupied ghost apartments are at $ 1.5 trillion by the end of 2017, or nearly 47% of all mortgages in China. According to Bloomberg, 44% of house purchases in China in 2018 were of second homes, and third-party acquisitions accounted for 25% of acquisitions, up from 3% a decade ago.
Yields on apartments fell dramatically
Since the wage did not catch up with the jump in prices, and since the rent is always due to the salary, it is no wonder that the return on assets has fallen dramatically. According to Global Property Guide, in 2017 the yields on apartments in the prestigious cities of Beijing and Shanghai fell dramatically.
“When we started collecting information about China, yields on all properties in Beijing were over 9 percent and in Shanghai they were between 4.7 percent and 7 percent,” the website said. “Last year (2017) we found that all types of apartments in Beijing were below 2.5 percent, and in Shanghai they were below 3.2 percent, while the cost of capital to contractors was 7 percent or 8 percent, and mortgage rates ranged from 5.5 percent, To 6%. ” This gap between the cost of capital and the yield on the property is a large red flag that is fiercely emitted.