“If I’d paid for it all myself, the price cut wouldn’t bother me as much, but there’s a lifetime of my parent’s blood and sweat in it. Developers’ profits are outrageous. The price they set when the housing market kept going up was far more than the real value.”

Danny Deng and his bride-to-be dreamed of their lives together as they walked through the showroom for a Shanghai housing project almost three months ago. Pooling his own and his parents’ savings, a loan from his boss and a 1.1 million yuan ($172,000) mortgage, he bought an apartment and secured his fiancee’s hand.
On Nov. 19, Deng faced off a ring of security guards three rows deep wearing camouflage and carrying shields as he joined more than 100 homeowners rallying in front of the development’s sales office. His transformation from newlywed to street protester came after China Vanke Co. slashed prices for future buyers at the Qinglinjing complex, erasing about 20 percent of the value of his three-bedroom unit overnight.
“If I’d paid for it all myself, the price cut wouldn’t bother me as much, but there’s a lifetime of my parent’s blood and sweat in it,” said Deng, a 30-year-old electrical systems salesman. “Developers’ profits are outrageous. The price they set when the housing market kept going up was far more than the real value.”

– from ‘Shanghaied Home Buyers Take to Street’, Bloomberg, 29 Nov 2011

Then why, Danny, did you buy it?
We know: Because you thought that prices would continue to go up, and up, and up, right? Right.
And if they had, you’d be taking credit, not complaining, right? Right.
Speculators are the same everywhere: Shanghai, Sydney, Spain, Ireland, Vancouver.
The outcomes of speculative manias know no cultural bounds.
– vreaa


More of Danny’s story from the article:
For Deng, the pain is more than financial. Tears swell in his eyes as he recounts the moment his father handed him access to his life savings of 360,000 yuan to help make the down payment.
The gift made Deng consider himself a member of the “ken lao” generation, meaning to gnaw on the elderly.
“I was depressed, uncertain, touched and a bit ashamed,” he said, asking not to be identified by his full Chinese name because of the personal nature of his story. “I had been proud and didn’t think it was their business. But when the moment really came, I knew it was impossible to manage only by myself.”
Deng had moved to Shanghai three years earlier from a small city in the north to be closer to a girl he met in college. When talk turned to marriage, his girlfriend insisted they buy an apartment first, he said.
“At my age, I should get married and I should have my own home whether or not I can afford it so that I can be the same as my classmates,” Deng said.
Deng saw an ad on Soufun.com for pre-sales of a project called Qinglinjing, meaning “Clear Forest Path,” that was being constructed near a soon-to-be built subway station next to the future home of the Shanghai Disney Resort. Deng and his girlfriend visited a showroom to walk the wooden floors of the replica 96-square-meter (1,033-square-foot) apartment, planning how they would fill its two bedrooms, living room and study.
“We loved it,” Deng said. “It suits us for the next three to five years because we plan to raise a child soon.”
The snag was its 1.7 million yuan price tag. Chinese policy requires a minimum 30 percent deposit. Deng had saved 70,000 — not enough. That’s when he called his parents, then borrowed another 50,000 yuan from his boss, and secured a loan of 1.1 million yuan paying as much as 7.8 percent interest from Agricultural Bank of China, he said.
On Sept. 28, Deng and his girlfriend signed a contract with the developer, happy after winning discounts including 40,000 yuan off for being a member for the Soufun.com website and a 20,000 yuan markdown by collecting 20 stamps on a red “home- passport” issued by Vanke. The end price: 1.58 million, or about 13 times Deng’s annual wage.
The next month, they got married. Paying the mortgage will take up 40 percent of the new couple’s combined salary.
… “I didn’t have a choice,” Deng said of the decision to buy. “I don’t want to be too different. Otherwise, maybe for a long time, I would be alone.”

Wow. Poignant story.
And so many similarities to what is going on to Vancouver: Bank of Mom and Pop; ‘girlfriend insisted they buy an apartment’; plans to move in 3-5 years (but now likely stuck); etc.
Also, some differences, too: 40% of income? (low for Vancouver); 1,033-square-foot apartment (MASSIVE by Vancouver standards), etc.
– ed.

47 responses to ““If I’d paid for it all myself, the price cut wouldn’t bother me as much, but there’s a lifetime of my parent’s blood and sweat in it. Developers’ profits are outrageous. The price they set when the housing market kept going up was far more than the real value.”

  1. As long as prices are going up, the “investors” are smart and their profits are a result of their hard work and courage.
    When prices turn, it’s all about the greedy banks and outrageous developers’ profits.

  2. You forgot this:

    When talk turned to marriage, his girlfriend insisted they buy an apartment first, he said.

    “At my age, I should get married and I should have my own home whether or not I can afford it so that I can be the same as my classmates,” Deng said.

    Exactly! Nobody wants to risk this: https://vreaa.files.wordpress.com/2011/10/i-married-a-renter.jpg

  3. My bet, a few readers here can relate to Deng’s dilemma.

    One note on China, as it relates to Vancouver. China has begun to unleash significant land reserves intended to build purpose-built rental housing with the purpose of bypassing ardent speculation and vacant unit issues.

    Vancouver… ostensibly is going to do the same, unleashing its “strategic land reserve” so as to build rental and other non-freehold longer-tenure accommodations to improve affordability (and bypass speculators).

    Trivia question: how did most of Vancouver’s “strategic land reserve” come into being?

  4. I’m shocked that you can buy a 3-bed place in Shanghai for only $172K CDN. All of the talk of Asian cities being more expensive plus talk of HAM coming and being comfortable with our prices and I realize I’ve been assuming Shanghai 3-bedrooms would be way more expensive.

    • You shouldn’t be. Especially considering the cost of labour of farm workers that come in to build them.

    • I was going to reply that, being near a yet-to-be-built theme park and subway stop, it’s probably WAY out there, but the Goog says only 31km and 45 minutes by road to The Bund, so not as far into the sticks as I would have thought.

    • You realize that the average income of Shanghai is like ten times less than Vancouver right?

  5. Village Whisperer

    Think about all the land the will be released for high rise condos when Vision tears down the Viaducts next year.

  6. The 20% price drop means Danny has already lost almost all of his parents’ life savings, in just three months.

    • 4SlicesofCheese

      According to my friend that I mentioned in the last thread “no one cares if the prices go super up or down, as long as you have a comfortable place to live.”

      Well I guess people have to try to convince themselves they are making rationale decisions somehow.

      • Will headline that story at some point, 4slices.

        The thinking you describe is interesting. People underestimate the pain they will experience in future when they are sitting underwater, considering their paper losses, a la Danny Deng.
        This is when the speculator in people becomes so obvious. They have NOT simply purchased the property for its utility as a home, at a monthly cost; they are actually very interested in its performance, in part, as a financial instrument.

  7. southseacompany

    Ah, but more stimulus may be on the way:
    “China, in Surprising Reversal, Moves to Spur Bank Lending” NY Times, Nov 30/11
    http://www.nytimes.com/2011/12/01/business/global/china-reverses-economic-policy.html

    • Now THIS is interesting.
      Watch these guys try to perform a soft landing.
      Bringing in a Jumbo with manual flight control cables made out of surgical rubber.

      • Chinese banks are fragile. It won’t take long until their entire banking system collapse.
        Listen to what Chanos has to say about it…

        http://www.bloomberg.com/video/81455126/

      • China will do all in its power to ensure bank lending goes to non-RE entities.

        A lesser announcement just made was them raising the poverty threshold to about $1/day, which allows a larger contingent to qualify for social assistance. This will work some of the way to divert economic output to consumption and away from investment. This is also known as “wealth redistribution”, meaning take wealth from one and give it to another.

      • Well, they caused this softening in the first place. How do you cause a soft landing? Simple, when the market goes down 10%, restrict supply and let cultural normalities take over. Guys need to get married, girl’s parents need to see a house to marry off their precious daughter, has been this way for many years.

      • One thing that I always tell people in the West, you should never underestimate what an authoritarian regime can do to control its own economy. All and every policy is available, if you can think of it, they can do it, they don’t need the approval of their people.

      • “you should never underestimate what an authoritarian regime can do to control its own economy.”

        And you should never over-estimate it as well, which seems to be the dominant opinion nowadays. There is a reason why capitalism has proven to be better than any authoritarian system over time. If you don’t let the market allocate capital efficiently, then you find yourself with tons of ghost towns, empty high-speed train and so on. This can not last forever and China will pay the price for it…

        As Chanos put it, China is built on quick sand. When its starts to collapse, and I don’t know when that will happen, the effect will be a lot worse than in Japan.

      • @makaya, well, if you put it that way, China shouldn’t have tried to control the market prices? It should simply let markets go wild. Screw their recent measures to try to cool down prices right? They should just let the market run the course. They didn’t do that, and they cooled down the market. I am simply saying that if they want to stabilize prices and add more demand, then there are a lot of measures that are still at their disposal, not to mention that they are still growing at a ridiculous rate. If their growth goes down, then they still have plenty of stimulus left. Their interest rate is very high compared to the West’s.

  8. So he bought a Y1.58m apartment that is 13x his income and had to go to various sources to get a loan for the 30% down. 30% down is Y474k. He had only Y70k or 4.4%. Luckily parents came to the rescue and gave him ALL their savings at Y360k. His annual earnings are only Y121k so he had to already borrow from M&D 3x his annual income. He then borrowed from his boss (so this will put him in a pretty demanding place – indentured servitude anyone?) Y50k or roughly 5 months of future salary. Then he borrowed Y1.1m at 7.8%? I don’t know what the terms are but if it is fixed over 30 years then his payments are about Y8000 or roughly 80% of his monthly pay! Since she must be making the same amount (article states the loan takes up 40% of their combined incomes) I guess the kids are on hold… but wait! They bought it to “own” their own roof, secure the in-laws consent and approval for the marriage, and they plan to have kids!

    Sorry Denny, but not only did the developer wipe out your 20% equity from M&D but you’re screwed. This will not end well.

    Oh… and this is very much beyond Vancouver. Avg annual family earnings are $72k and 13x that is $936k – a very nice 1000 sq.ft. apartment in Coal Harbour with views could be had for that and much bigger and better in other areas. Maybe the market won’t crash here?

  9. Well, given the imbalance of male to females and the pressures from parents on the only child, in this case a male child, to marry and produce a male heir, I can understand it. In China, for a non-rich guy to get married, it can be like winning a $100K lottory. For someone like Deng who is not originally from Shanghai to be able to marry I presume a local Shanghai girl with a Shanghai residency card, it is almost like winning a $1M lottory jackpot. Yes, I know this is totally unbelievable to a lot of you here. However the current state of China society is like this. I’m not sure if there is an equivalent in Vancouver/Canada. Maybe it would be like a new FOB 3rd world immigrant manage to marry the daughter & heir to a vast family fortune of one of the old money families in Vancouver?

    And yes, this totally sucks and yes there is a lot of fear of missing out on the house, on the marriage, on the price increases. When prices fall this much and wiping out literally a lifetime of savings, there can be a lot of anger, regardless of the reason. That’s also why there are currently a huge crop of TV series and movies on the burden of high housing prices and financial pressures on the young people and the negative impact on families. If any of you are interested I can give you some names. These TV series are really good, I would say they are HBO series type of quality, and most of them are all available on YouTube or $2/DVD at a Chinese DVD store. The only thing is you have to know mandarin or can read Chinese.

  10. shiva’s tour of duty – coming to theaters near you

    • Shiva?… Funny you should reference the Bhagavad Gita, Chubster… Remember JR?…

      http://tinyurl.com/6ox8vdu

      • oh, you mean jr ewing? 😮 well, that’s sort of moralistic and my view of shiva is strictly the amoral, inevitable consequences of acts done. seems maybe a fine-ish distinction but it’s all the difference in the world, imo. some may say people deserve what’s coming to them. i’d prefer to quote will munny (ack – that’s too just) “deserve’s got nothing to do with it”

      • More like Chigurh then.

      • @blammo. of course, i’m not like that but i think i understand it some. no country a masterpiece in so many ways. if you watch and try to impose your morality on it, it just won’t let you and will chew you up. otoh, if you take the sherriff’s pov and stop trying to judge things, it’s as if you can step outside and just watch things unfold logically. when you see all the stuff that goes on in the world, the really nasty stuff, this may be the only way to take it for full value and not go crazy. ok now how about that RE?

  11. fun blog. it’s sort of like van flavored socio-economic roundtable with just about one. feel like such a truant. anyway, just when you thought tax loss selling might get interesting, seems qe3 has cleared liftoff. something big likely almost blew up – is this final acknowledgement that salvation of said entity via public campaign for above table mass euro printage is doa? bad! bad! no bonuses for eurocrats this year – failed mission to delude masses and now must commit more dollar printage than forecast. btw, have you seen those goldman ads on bloomberg? nice. god’s work indeed.

  12. “At my age, I should get married and I should have my own home whether or not I can afford it so that I can be the same as my classmates,” Deng said.

    Ay ay ay.

  13. The amount of stupidity in this city is astounding. Who needs roads, when we can have gondolas and bike lanes, right?

  14. After reading the whole story, it’s like seeing myself at the same situation (if I didn’t came to Raincouver three years ago!). I was working and living in Shanghai for two years: it’s a nice city, more transparent and efficient than its counterparts in inter part of the country. More foreign investments and more job opportunities. And therefore more attractive for young people, either uneducated, educated or over educated:) At that time I remember the main topics between colleague is either stock market or property price. There is pressure for me to buy apartment before I got married with my wife (we both live and work there) but I didn’t go that route by empty my pocket (not much) and by asking my parents for their help (not much they can do either). At that time, 2006-2007, the price of a 2-3 bed apartment in outer skirts of city will cost 7 to 10 times of my annual income with at least one hour (doesn’t matter you drive or not, could be two if you are not living beside subway) commute to work.
    Well, I guess I’m lucky not be part of the housing party in Shanghai, but here in Vancouver, it’s definitely another show going. I’ve been here 3 years now and realized the house price was shooting up. I don’t know the exact price range here in Burnaby but some SFH will easily cost you 1mil. Consider all the fun facts undergoing these days: QE3, bailout, Euro crises, BPOE, HAM, I guess I will keep watching everything and restrain myself from jumping onto the Vancouver housing bandwagon even though I’ve missed a Shanghainese one.
    Cheers.

    • Thanks for your story GuyInBurnaby. We’ll headline it.

      • Thank you VREAA, it will be my pleasure to be headlined on this site. I come here quite often and I like it. Keep up good work. The most value information I can get on website like VREAA is how local people think and feel about RE and economy in their city, province and nation wide.

  15. A too good not to share here/now Quote ‘O The Day:… [Note to Ed: file under, “You just can’t make this stuff up”/StrangerThanFiction]

    “Only when you are beaten frequently as a child can you learn discipline and etiquette.” – Xiao Baiyou [aka WolfDad] of Guangzhou, Guangdong province, a Ji’nan University finance alumnus who later went on to build his wealth through real-estate investments and luxury goods. Although he said he has stopped beating the children now at college, he insisted he will still interfere in their life, especially when it comes to studies and marriage.

    [ChinaDaily] – Howl of the ‘Wolf Dad’ – Xiao Baiyou, 47, recently published a book about his fathering technique, which involves beating his children with a rattan cane…

    http://tinyurl.com/72mljer

  16. 4SlicesofCheese

    http://www.aljazeera.com/indepth/opinion/2011/11/2011113010142472788.html

    “The China bears’ feeble growl
    Although it has problems, the Chinese economy remains fundamentally healthy.”

  17. Formerly “as a Chinese myself”

    “1,033-square-foot apartment (MASSIVE by Vancouver standards), etc.”

    Chinese RE calculates the unit size quite differently. For example, the balcony is added to the overall condo size. The stairs, building entry and other common area are divided by the number of the units and then add to each unit in the building. I think it’s the same case in HK.

    On a side note, based on the comments posted, I think a few regular posters here can read Chinese and have somewhat better knowledge about Chinese RE and Chinese economy than other posters without the language skill.

    But after reading the board for over a year, it seems to me that they are only interested in posting the comments that are very one side. I am not interested in their motivation of doing so, but just feel bad that these comments can be very misleading.

    IMHO, Julian Lee is probably only person here that gives a more neutral point of view on Chinese mind set on the issues discussed here.

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