Funny thing is you don’t actually own your own home in China since just about everything is a 70 year lease… so people would rather pre-pay a 70 year lease under the guise of ownership but don’t want to rent for a year at a time where you pay monthly. Go figure.
I think in reality even though you are only signing a 70-yr lease on the land the government likely is not going to ask you to buy the land all over again after 70 years. Maybe they ask you to pay a fee, and my guess is in the end it works out to be comparable to the property taxes US land owners pay. The government doesn’t want to completely give up land ownership to buyers in order to retain flexibility, but it’s in no way the same as renting out an apartment with a 70-year lease.
Leasehold is better for the nation. After 70 years, the buildings are probably too old to maintain, better to tear down and rebuild. If freehold, you need to get agreement through voting, a complex and time consuming process. For leasehold, government has a choice to ask for a fee to continue the lease for x number of years or tear down and rebuild, very flexible depending on the desirability of the neighborhood. Leasehold ensure rejuvenation.
Btw, 70 years is about lifespan of the purchasers, assuming most of them bought at the age of 25-35.
The challenge with the lease model is the formation of “dead capital” which stifles innovation. Of course some of this exacerbated by local policies. Think about how many companies start up because people are able to borrow against home equity to invest (flip side is how many lose their shirts). However, lending institutions tend to substantially mark down the value of a property or even refuse to lend (even for purchase of primary ownership) when there is a reduced time period left on these extended leases. Best example would be Singapore where you see a marked fall off at specific cliffs on value and LTV that can be borrowed based on the age of a HDB flat with no support for lending after 30 years of age (iirc).
So if you spend a good chunk of money on properties that are “owned” in this manner, after a certain point it may be ok for a primary residence (assuming you bought it before the value cratered) but any capital you have invested in it is dead capital as far as reuse is concerned
Dead capital? Not many borrow against house to start business. If need to borrow against the house to do business, imho should either downgrade or rent. Otherwise is wanting to have the cake and eat it too.
Anybody need to borrow money to buy property less than 30 years lease should be renting.