Boom or Gloom: A Comparative Study of the Propensity of First Home Buyers in Beijing and Shanghai

Abstract

This paper seeks to contribute to a better understanding of the propensity of first home buyers in Beijing and Shanghai in urban China. Under planned economy since 1949, housing was provided by the State through the danwei or ‘work unit’ organizations at monthly rental of about 1-3 % of the household income. However, little revenue could be generated from such low rental, resulting in poorly maintained buildings and insufficient housing investment by the government. To tackle the severe housing shortage problem, urban housing reform was introduced in 1988. The objectives of the housing reform were privatization and commercialization of housing. The focus was on affordable housing, like the Anju (comfortable) housing project for ordinary households. By way of background, this paper will present an overview of the property markets in urban Beijing and urban Shanghai since 1988. Although a lot has been researched in the housing reforms, housing preferences and housing inequalities, there has been very little research into the home owning propensities of first home buyers (FHB) in China. Based on data collected in Beijing and Shanghai in Autumn 2004, this paper will aim to test the hypothesis that the higher the total incomes of FHB, the higher the level of buying an apartment or house. Qualitative method will be used, with over 50 in-depth interviews conducted in each of the two cities studied. For deeper understanding of their homeownership propensities, descriptive data of the interviewees was analysed under five categories, namely: the socio-demographic characteristics; income levels; housing choice; mode of finance; and impact of government policies to assist FHB. The data was then transcribed, summarized and processed using a spreadsheet. The interview results appear to support the hypothesis that fulfilling the homeownership dreams for first home buyers is the result of affordability.