The aspirational middle-class housing market in China means mortgages are within reach but at an added cost.
In fact, the emerging middle class economy is helping drive the housing market in the country, with gains in Q4’12 at their highest in two years.
The added cost for this middle class market is not in the average price, however, but real-estate tracking service, SouFun, notes that the average price of an apartment in China requires about 40 years worth of an annual income to pay off.
According to Bloomberg:
Mortgage rates, which move with the benchmark interest rate, usually have maturities of five to 30 years. The People’s Bank of China’s benchmark lending rate for loans longer than five years now stands at 6.55 percent.
Outstanding residential mortgage loans grew 12.9 percent last year to 7.5 trillion yuan, the slowest pace in four years, as China tightened lending, according to central bank data.
However, prices are expected to increase, which means more of the middle class in China are rushing to buy while prices are still relatively low. Developers are benefiting from the buying surge, noting that sales volumes are doubling or even tripling in some cases.
It’s also anticipated that the new government, taking power in March, may instil cooling measures to slow the pace of growth in the housing sector. In the meantime, however, this may further push the current buying frenzy.