China Rental Market

@Manch,

Your CRV is about to put on some major mileage…

My better half spent a good chunk of time recently in Shanghai. Her rent was peanuts while the cost to buy the same apartment was astronomical. Considering the number of vacant units due to the craze to buy, not sure how it makes economic sense to get into the renting business big time in China. Also in China you don’t really own your house/apartment/etc. You have a lease - 70 years iirc - then the land returns to the government (kind of like most of the land in Singapore which is 99 years). so you are effectively subletting :wink:

HDB flats are all 99 years leasehold yet price appreciates well :grin: because Singapore government rejuvenates the neighborhood i.e. paid market price to acquire the flats or choice of replacement flats + some cash, when the flats are too old, typically less than 60 years to go.

How can the government afford that?

Asset inflation. They can resell the land they repurchased at a higher price. The newer HDB flats often tend to be smaller (in size even if they have more rooms) then the older flats or may be in a less desirable location. The value of land in Singapore has been going up at a pretty fast clip.

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Additionally this gets into a somewhat arcane and obscure way the govt reports the cost of HDB flats. Now the following is pretty speculative as i dont think there has been any clear reporting on it (i could be wrong). The govt claims that they dont make any money on HDB flats. But the way they do this is by including the cost of land and infrastructure development and amortizing the cost over the flats they build. so if you back out the cost of land and infrastructure development, the cost of the flats are actually very low. If the govt buys back the flats to resell the land for private property development or higher end HDB flats, they are really only out of pocket the cost of the actual building the flats as the land costs and infrastructure costs are recouped. Now this is just my naive understanding so DON’T SUE ME :slight_smile:

Are you taking issue with that and argue that government did make some money? Isn’t it good that government makes money since their money is taxpayers’ money, which mean government doesn’t need to raise tax to recover the cost. Are you implying government’s money is not taxpayers’ money?

Philosophical question. Should a government be run like a business (for profit) or run to maximize some other outcome. Anyway i was rendering no moral judgement on the no profit statement but merely repeating what they claim and showing how it can be true yet not showing the complete picture.

The ideal is a balanced budget. Currently, usually end up with a surplus. Almost all government services aim to breakeven, not profit oriented. Those money making government-owned companies are not government services. Not sure what “other outcome” you are referring to.

Debt is a tool. If we want governments to be efficient, they should use debt as a tool just as businesses and people do. balanced budgets over long term is a good ideal, but expecting to balance every year is unnecessarily crippling yourself. You dont go to a corporation and tell them they can’t borrow. You want to be able to do deficit spending in lean times to start the economy and build up a surplus in a good times. BTW Singapore takes this to extreme. they are not even trying for a balanced budget but to run up massive surpluses (hence the amount of sovereign wealth they control). How much of a better life would the citizens have if some of the surpluses can be spent towards a better quality of life.

Also one more thing. GLC (Government Linked Companies) have an outsized influence in the local Singapore economy. This has been postulated as to one of the reasons you don’t see any breakout private companies coming from Singapore anymore. They get drowned at birth with GLCs being dominant across multiple verticals.

You know a lot about how Singapore government works but not too au fait about the rationale.

Budget deficit is inflationary. Budget surplus is deflationary. In the early days, Singapore growth is very fast, so need to have budget surplus to slowdown the growth so that the growth can be stable and last longer. Singapore does have occasional budget deficit to restart recession.

Singapore government also believe that too good life leads to complacency and entitled mentality. Just look at how America. Try taking away social security :grin:, unemployment benefits and pensions :sweat_smile:

Heh. I wouldn’t disagree with that statement. There’s probably more i don’t know then what i know. :slight_smile:

China’s property market is slowing down. I just realized the other day a much better way to play the Chinese market is thru vacation rentals. They have their versions of AirBnB. Actually more than one. Vacation rental money is much, much higher than regular rents.

Have you dipped into the Chinese real estate market yet?

Not yet. Need to find lenders. I am a leverage junkie. Don’t like the idea of paying cash.

Managing those vacation rentals would be a nightmare… hope you have relatives there to help you out… :laughing:

My mom and brother are going back to Canton in a week… they are trying to take back a building built by my grandfather that was taken away by the communists… :thinking:

There are comanpines that can manage for you. Of course it’s good to have some boots on the ground to answer text massages and fix the last minute problems.

Ask your brother to look for lenders and report back. I firmly believe there is a Chinese solution to every “problem”. :smile: