Beijing creates a generation of housing slaves

Sherry Sheng, a 29-year-old Shanghai policewoman, bought herself a 4,000 yuan (HK$4,930) black fur jacket, splurging for the last time before she starts paying off the mortgage on her first home.

Sheng is part of a generation of middle class that mainland media have dubbed fang nu, or housing slaves, a reference to the lifetime of work needed to pay off their debts. They are taking on mortgages even as Beijing maintains property curbs to damp prices that have almost tripled since the mainland embarked in 1998 on a drive to increase private home ownership.

"It's a treat for myself because I could never afford such a luxury after I start repaying my housing loans next month," said Sheng, who paid 1.1 million yuan for the one-bedroom flat on the city's western outskirts and will be using about 70 per cent of her salary to service her mortgage.

The mainland's growing middle class reaching for homeownership helped property prices rebound starting in the second half of last year. They rose 1 per cent in January from December, the biggest gain in two years, according to real estate website SouFun. Home prices in Beijing and Shanghai each rose 2.3 per cent from December.

Average per-square-metre prices in 100 cities tracked by SouFun are five times average disposable incomes. A 100-square-metre (1,076 sq ft) flat today costs about 40 years' income, according to SouFun and government data, even as salaries have more than quadrupled since 1998.

Sheng was able to buy her 50-square-metre flat after borrowing a combined 770,000 yuan through a 20-year mortgage from Agricultural Bank of China and a 15-year loan from the local housing providence fund. Her parents helped with the 30 per cent down payment. She will repay about 4,000 yuan a month for the home, a one-hour subway ride from central Shanghai's historic Bund that cost 16 times her annual salary, based on the price of the flat and her income.