BEIJING, May 16 -- In a modern society, the word "slave" should not appear
at all. But there is "housing slave" in China - people who use most of their
salary to repay their loans due to soaring housing prices and rising mortgage
"Housing slave" is a new buzzword translated from fangnu in Chinese pinyin.
People in this category can barely maintain a decent standard of living although
they may have big apartments in downtown urban areas.
Vivian Huang, a 27-year-old administrative personnel in a multinational
company in Shanghai, pays 2,842 yuan (US$355) in monthly repayment for her
"I have to think more than ever before I change jobs, travel or even go
shopping after work," said Huang who borrowed 500,000 yuan from a local bank to
buy an apartment worth 720,000 yuan in the city.
"I am more sensitive to the news of interest rates rises and can't imagine
if I lose my job or fall ill," said Huang whose monthly pre-tax salary is 5,000
Like Huang, many other Chinese find that buying an apartment does not
necessarily mean the start of a better life.
Almost one-third of the mortgage borrowers pay off the monthly repayments
using more than half of their monthly salary, according to a recent survey of
15,014 respondents nationwide by Sina.com.cn, one of China's most visited
It is internationally accepted to use one-third of the monthly salary to
finance a mortgage.
Meanwhile, the China Banking Regulatory Commission, the regulator, stressed
that lenders should control the ratio of borrower's mortgage to the salary each
month below 50 percent and the monthly liabilities, including mortgage loan,
should be less than 55 percent of the total revenue.
However, in order to boost mortgage loans, which boast the lowest
non-performing loan ratio among all types of loans, domestic banks have been
easing their loan application approval.
An applicant with a 4,000 yuan monthly salary can easily provide a 8,000
yuan per month salary certificate to a bank to apply for mortgage loans.
Increasing reliance on mortgage loans has elevated risks of bad performing
loans for lenders, said industry officials.
Shen Xiaoming, a CBRC official, warned last month that China has entered
the stage of risk exposure in the individual home mortgage loan sector due to
fluctuation in housing prices.
He said the ratio of nonperforming home mortgages has risen to 1.5 percent
at the end of last year from less than 0.5 percent in 2001.
Wu Xiaoling, the deputy governor of the People's Bank of China, the central
bank, said recently that mortgage loans have become the main debt for Chinese
people, and therefore have a direct impact on their other consumption.
Since China has commercialized housing allocation instead of distributing
homes as a form of welfare nine years ago, millions of households have purchased
houses financed by a combination of personal savings and mortgages.
However, escalating housing prices in the past three years have made
people's savings hardly enough to pay the downpayment and they are relying more
on mortgage loans than ever.
The central bank's data show that more than 70 percent of domestic home
buyers have to borrow to finance their purchases.
Individual mortgages offered by domestic commercial lenders topped 1.84
trillion yuan at the end of last year, more than 35 times the 51.4 billion yuan
in 1998, according to the central bank.
While the class of fangnu complain about the overly high housing prices,
some developers suggest customers need to change their attitude towards owning a
It is deeply rooted in Chinese traditional thinking that married people
have to live in their own house.
"It's unrealistic for everybody to own an apartment," said Feng Lun,
chairman of Vantone Real Estate Co, a Beijing-based developer.
"So many young couples live in rented apartments in developed countries. So
why are Chinese young people so keen to buy something that they can't afford at
an early age?" he asked.
Feng's remark is echoed by Ren Zhiqiang, another developer who insisted
that housing supply in China only targets the middle and high income class. Low
income families should consider budget homes or renting first.
(Source: Shanghai Daily)