复旦大学：Housing Reform and Housing Affordability in China（A Case Study of Shanghai）

Housing Reform and Housing Affordability in China: A Case Study of Shanghai Jie chen PhD(Uppsala), Associate Professor School of Management, Fudan University - Institution for Housing and Urban Research Uppsala University, Sweden

Housing Reform and Housing Affordability in China: A Case Study of Shanghai Jie Chen PhD (Uppsala), Associate Professor School of Management, Fudan University & Institution for Housing and Urban Research, Uppsala University, Sweden

The Contents Housing reform in China 1978-2006: the transition path Housing market development in Shanghai 1993-2006 Assessing the housing affordability situation in Shanghai 1995-2006 China Urban Land and Housing in 2 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 2 The Contents ◆Housing reform in China 1978-2006: the transition path ◆Housing market development in Shanghai 1993-2006 ◆Assessing the housing affordability situation in Shanghai 1995-2006

Contributions Background materials A Systemic analysis of housing affordability in urban China o Methodology contribution: New approaches of measuring housing affordability >dynamic price-to-income ratio dynamic residual income approach China Urban Land and Housing in 3 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 3 Contributions ◆Background materials ◆A systemic analysis of housing affordability in urban China ◆Methodology contribution: New approaches of measuring housing affordability: ➢dynamic price-to-income ratio; ➢dynamic residual income approach

The rise of the question The issue of housing affordability in China must be understood in the historical background o Before the 1978 reform, residential housing was a welfare good that distributed by the authority, no problem of affording, but just chance to be allocated and time of waiting o Only after the housing becomes a commodity good the housing affordability issue arises The transformation of housing finance system has played a critical role in this process China Urban Land and Housing in 4 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 4 The rise of the question ◆The issue of housing affordability in China must be understood in the historical background ◆Before the 1978 reform, residential housing was a welfare good that distributed by the authority, no problem of affording, but just chance to be allocated and time of waiting ◆Only after the housing becomes a commodity good, the housing affordability issue arises. ◆The transformation of housing finance system has played a critical role in this process

The welfare housing allocation and old housing finance system A Under the welfare housing system, government produced and allocated housings e Virtually all housing investments were solely financed by the state budgetary funding The single-channel state budgetary funding housing finance system could not be sustained Due to the continued financial deficit investment on urban residentia a housing was consistently low Housing storage was extremely serious in big cities like Shanghai China Urban Land and Housing in 5 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 5 The welfare housing allocation and old housing finance system ◆Under the welfare housing system, government produced and allocated housings. ◆Virtually all housing investments were solely financed by the state budgetary funding. ◆The single-channel state budgetary funding housing finance system could not be sustained. ◆Due to the continued financial deficit, investment on urban residential housing was consistently low. ◆Housing storage was extremely serious in big cities like Shanghai

Housing Reform in China Three phases of China housing reform after 1978 01)1980-1988, rent increase 0 2)1989-1998, the selling of public housing(at discounted rate), the design of housing subsidies, infant developments of new housing finance system including the housing provident fund 0 3)1998-now, the complete demolition of welfare housing system and the formation of a free-wheeling, market-driven housing sector China Urban Land and Housing in 6 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 6 Housing Reform in China Three phases of China housing reform after 1978: ⚫ 1) 1980-1988, rent increase; ⚫ 2) 1989-1998, the selling of public housing (at discounted rate), the design of housing subsidies, infant developments of new housing finance system including the housing provident fund; ⚫ 3) 1998-now, the complete demolition of welfare housing system and the formation of a free-wheeling, market-driven housing sector

The Restructuring of Housing Finance System in China(1) Housing Provident Fund(HPF): participating employees contribute a certain proportion of their salaries to their hpf accounts and employers contribute an equal amount. The compulsory minimum contribution rate in Shanghai is 7%. the savings at hpf can on y for housing-related purposes The functions of HPF: HPF initially was designed to finance housing production now it mainly issues personal home mortgage at a preferential interest rate o Problems with HPF: there may be an economic redistribution from the low-to high-income households China Urban Land and Housing in the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 7 The Restructuring of Housing Finance System in China (1) ◆Housing Provident Fund (HPF): participating employees contribute a certain proportion of their salaries to their HPF accounts and employers contribute an equal amount. The compulsory minimum contribution rate in Shanghai is 7%. The savings at HPF can only for housing-related purposes. ◆The functions of HPF: HPF initially was designed to finance housing production now it mainly issues personal home mortgage at a preferential interest rate . ◆Problems with HPF: there may be an economic redistribution from the low- to high-income households

The Restructuring of Housing Finance System in China(2) o The Home mortgage Market in China: the total outstanding value of home mortgage had a 43-folds growth between 1996 and 2005. The share of home mortgage in the total financial loans increased from 0. 49%in 1998 to.9% at the end of 2005 The Home Mortgage Market in Shanghai:the importance of home mortgage is higher in Shanghai than any other cities in China: in 2005, the newly-added home mortgage loans accounted for 45.6% of all newly-added long-term RMB loans and the outstanding value of home mortgage loans accounted for 15.8%of total financial loans China Urban Land and Housing in 8 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 8 The Restructuring of Housing Finance System in China (2) ⚫ The Home Mortgage Market in China: the total outstanding value of home mortgage had a 43-folds growth between 1996 and 2005. The share of home mortgage in the total financial loans increased from 0.49% in 1998 to 8.9% at the end of 2005. ⚫ The Home Mortgage Market in Shanghai: the importance of home mortgage is higher in Shanghai than any other cities in China: in 2005, the newly-added home mortgage loans accounted for 45.6% of all newly-added long-term RMB loans and the outstanding value of home mortgage loans accounted for 15.8% of total financial loans

An overview of Shanghai residential housing industry Before the 1978 reform investment on residential housing was little. The consequence: the living space floor per capita in 1952 was 3.4 sqm; in 1978, 4.5 sqm, Between 1978-1998, housing development was much lagged behind the economic growth The 1998 reform lifted the welfare housing system. But the market slumped into stagnancy between 1999 and 1999. The Shanghai government had tried hard to stimulate the home demand Since 2001, the housing market begins soaring. The house prices in Shanghai kept rising with continuously double-digit rises between 2002 and May of 2005 The market has been cooled down since May of 2005 However, strong rebound since this summer China Urban Land and Housing in 9 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 9 An overview of Shanghai residential housing industry ► Before the 1978 reform, investment on residential housing was little. The consequence: the living space floor per capita in 1952 was 3.4 sqm; in 1978, 4.5 sqm, ► Between 1978-1998, housing development was much lagged behind the economic growth. ► The 1998 reform lifted the welfare housing system. But the market slumped into stagnancy between 1999 and 1999. The Shanghai government had tried hard to stimulate the home demand. ► Since 2001, the housing market begins soaring. The house prices in Shanghai kept rising with continuously double-digit rises between 2002 and May of 2005. ► The market has been cooled down since May of 2005. ► However, strong rebound since this summer

This year(2007.1.1-2007.11.8) Sale 133,010 units of first-hand residential property (implying 13,058, 400 square meters)have been sold Available on the market First-hand: 26, 878 units( 2.44 million sqm) Second-hand: 72,062 units(8.59 million sqm) China Urban Land and Housing in 0 the 21st Century, HK Dec 2007

China Urban Land and Housing in the 21st Century, HK Dec.2007 10 This year (2007.1.1 - 2007.11.8)  Sale:  133,010 units of first-hand residential property (implying13,058,400 square meters) have been sold  Available on the market:  First-hand: 26,878 units (2.44 million sqm)  Second-hand: 72,062 units (8.59 million sqm)