I recall a presentation on China at the Asia Society on the eve of the financial crisis, in which an economist commented on China’s extremely low interest rate on deposits (less than 1%) versus its markedly higher inflation rate, and commented that that was a recipe for hyperinflation. Well, that hasn’t been and is unlikely to be the result. Instead, we are seeing an even more extreme version of what negative real interest rates in the US produced: leveraged asset speculation, particularly in the biggest asset class, residential real estate.
Recent articles in media have illustrated how out of line prices are with incomes and rental yields. Reader Glenn Stehle highlighted a key factoid in a recent New York Times article on China’s real estate
And as the prices of new apartments soar — in Shanghai, for instance, they often exceed $200,000, while the average disposable income is about $4,000 a year — the trend also threatens to undermine the central government’s goal of affordable housing for the rising middle class.
We noted that the Chinese officialdom is worried about the social implications of overpriced housing. Richard Smith, who provided a series of posts on China’s real estate markets (here and here), tried making sense of the investment math:
The residential RE stuff is completely baffling: the valuation differences between cities are large; but none of them look cheap. Shanghai may be extreme – but even at the more modest (!) house price = 8x salary in other cities, a 30-year mortgage @ 6% or so takes 60% of gross average income (unless my calcs are completely shot) . So I can’t understand who is buying housing at all or how or what they are living on – even if the parents and grandparents are helping out their 1 child, it is quite a stretch. Rental yields 2-4% depending on location so that’s no good if there’s much gearing.
Another piece of the puzzle comes from Andy Xie (Caixin via MarketWatch), that the number of vacant apartments in China, the result of speculative warehousing (purchased as an investment but kept vacant) plus new construction languishing unsold is much greater than commonly realized:
How many flats in China are sitting empty? The media recently floated a story — denied by power companies — that 64.5 million urban electricity meters registered zero consumption over a recent, six-month period. That led to a theory that China has enough empty apartments to house 200 million people….
What especially distinguishes China’s property bubble…is an unprecedented amount of living space. This huge stock of empty flats equals the nation’s quantity bubble.
Quantity bubbles are less common than price bubbles, and they don’t last as long…A quantity bubble is sometimes a construction bubble, and it fizzles out when a building cycle turns over, crashing prices as soon as new supply becomes available….
Quantity and price bubbles may grow together. Southeast Asia, for example, experienced a quantity-cum-price bubble that lasted several years in the 1990s. As regional currencies were pegged to the dollar, loose monetary conditions were imported from the United States, fueling a property bubble. Due to few restrictions on urban development, rising prices led to massive increases in supply. Liquidity inflow fueled speculative demand. But when U.S. monetary policy tightened, the market crashed and triggered the Asian Financial Crisis…
One useful figure for analysts is China’s living space per capita….Based on this limited data, however, we can confidently conclude that China does not have a housing shortage. Moreover, its per-capita living space is higher than in Europe and Japan. Indeed, if we adopt Japan’s standard, China already has sufficient urban housing space for every man, woman and child in the country.
Far more important than general data, however, are the housing figures pointing to a huge quantity of empty flats apparently being held only for speculation.
In a normal market, the vacancy rate should be equal to the number of households relocating, times the average transition period, plus newly formed households times the average purchase period. For example, a vacancy rate of 1.5% could accommodate a market in which 6% of households relocate every year, and the transit time is three months. If new household formation is 3%, and the average period for a property purchase is six months, this factor requires a vacancy rate of another 1.5%. The total normal vacancy rate should be 3%. This figure includes the new properties ready for sale.
Although the government doesn’t publish vacancy data, I think the vacancy rate for the nation’s private, commercial housing stock is between 25% and 30%. That’s at least double what’s required in a normal market. The gap between what’s needed and what’s available can be viewed as speculative inventory. The value of this inventory held by speculators is probably around 15% of GDP. It’s being kept on ice, just as copper and other commodities are hoarded in anticipation of rising prices…
Right now, tight credit is holding back the market, and supply is piling up on the developer side as inventory. The government’s tightening squeezed buyers of second and third homes, and transaction volumes across the country collapsed. What I’ve learned from intermediaries is that most property demand now falls into restricted categories, i.e., speculative.
It’s reasonable to assume, therefore, that the supply would be close to 15% of GDP in value this year and in 2011. That’s because when the policy is relaxed — as most expect — speculation will probably revive and lead to a doubling in the total value of speculative inventory.
Chances are good that policy makers will indeed relax policy. In some cities, banks are already loosening a bit. A key reason is that local governments have a lot of debt — commonly five times more debt than revenue — and could get into financial trouble without a decent level of property transactions.
Local governments in China depend on real-estate deals for revenue and could default if the market falls too far. Thus, the central government may loosen policy to help the locals without making a formal announcement. Such a change of heart would ease short-term government difficulties but double the trouble down the road when the property bubble bursts.
So even if China’s stock of empty flats is only half that recent estimate of 64.5 million, it would still be equivalent to 20% of all urban households. That’s higher than Taiwan’s vacancy rate at the peak of its bubble. Moreover, as credit rules are loosened, the stock could rise to more than 30%.
China’s housing oversupply isn’t surprising. Excess supply reflects the under-pricing of capital, and China’s system is structured to increase supply quickly. But rising prices alongside rising vacancy rates are surprising. Normally, speculators are spooked by high vacancy rates. But China’s phenomenon is unique for at least four reasons:
1) A sustained negative real interest rate has led to a falling demand for money and rising appetite for speculation. Greed and inflation fears are working together to form unprecedented speculative demand for property.
2) A massive amount of gray income is seeking safe haven. China’s gray income of various sorts could be around 10% of GDP. In an environment of rising inflation with a depreciating dollar — the traditional safe haven — China’s rising property market is becoming a preferred place to park this money.
3) Few people in China have experienced a property bubble. The property crash in the 1990s touched a small segment of society, such as foreigners and state-owned enterprises. Geographically, it was restricted to the country’s freewheeling zones in Hainan, Guangdong and Shanghai. Most people didn’t even know there was a property crash. This ignorance has led to a lack of fear that’s now turbo-charging greed.
4) Speculators think the government won’t let property prices fall. They correctly surmise that local governments rely on property deals for money and do all they can to prop up prices. But their faith in government omnipotence is misplaced. At the end of the day, the market is bigger than the government. The government can delay, but not abolish, market forces. Nevertheless, faith in government is replacing fears of a downside, and speculative demand will continue to grow as long as credit is available….keeping interest rates low will only worsen the nation’s bubble problem. Periodic credit tightening and crackdowns on speculation won’t work because they are not taken seriously and never last….
One only needs to glance at modern-day price and quantity property bubbles around the world to understand the stark consequences. What’s happening to the U.S. economy now is a prime example, and it should be lesson for us. Otherwise, China’s economy will look like America’s.
Notice the bind China is in. It has to keep the bubble going to preserve local government finances. They’ve become a classic Minsky Ponzi unit. And efforts to move away from the dollar as reserve currency, something which China desires from a practical and prestige perspective, only makes the domestic bubble worse.
We’ve pointed out repeatedly that creditor nations typically fare the worst in severe financial crises. China appears to be defying that pattern, but the implosion of its real estate bubble may prove it to be no exception.
A couple of things to remember about China:
1. A lot of the property has been bought with cash (not 0 down mortgages).
2. At current prices many many folks have on paper at least, made a lot of money
3. I lived through the Taiwan property bubble in the late 80’s (the apartment we lived in went up about 5 times in value, but our rent went up about 10% over 4 years). Rent seemed to have no correlation with the price of the property as the owner was more concerned with a) a place to keep their money, and b) appreciation. I knew more than a few folks who would not rent out a new apartment (as they wanted to keep it in pristine condition for when it was eventually sold, even if that was 5 years later.)
All that said I have no doubt China has a property bubble. I just caution that how the “collapse” plays out may surprise us (The Taiwan “crash” sure did surprise me). The Chinese have a different view of wealth, consumption, investment and property than we do and in many cases it makes “no sense” to us.
Response to #1, which I’ve heard from a number of people.
This doesn’t at all matter. China’s banking system is highly leveraged, and whether this is to homeowners or to local governments dependent upon homeowners makes little difference. In a bust situation, there will still be a credit crisis and all of the baggage associated with one.
Secondly, Chinese savings, which have been piled into homes, are the only real safety net that many people have. They are dependent upon these savings and, in the event of losses, will spend even less in order to repair the damage. The lack of widespread mortgaging will not spare either consumer spending or housing prices, which will fall in kind.
Finally, to the extent to which Chinese views are “different” – meaning poorly suited to a modern financial system – their situation will only be made worse. China is perhaps the only nation in history that has been engineered at every level to support and reinforce a bubble economy, and the faith of the people has been central to this process.
In response to “1. A lot of the property has been bought with cash (not 0 down mortgages).”
This argument is often trotted out in order suggest that Chinese property speculators have holding power and/or are less likely to sell into a falling market and thus the property market is less likely to be prone to boom and bust cycles.
I have thought long and hard about this and at first bluch it does sound a little convincing. However, the same kind of speculators also bought ‘A’ shares with the same hard earned cash (with no margin financing available) and yet the Chinese Stock market still suffers from periodic crashes.
Paying in cash for (overpriced) speculative stocks is no guarantee that a bubble will not and/or cannot burst.
If it really gets crazy they will just have Cultural Revolution number two resulting in a new Gang of Four lynching. Meanwhile 200 million folks get new housing.
Stranger things have happened with central planning. One kid comes to mind.
One kid was probably the best thing China’s government did. It is at the root of almost all the current prosperity. Yes it will cause problems in the future but it made what is happening now possible.
I went to China 25 years ago and knew right away that population growth had to be priority number one. There was simply no room left. Without “one child” China would be in a lot more trouble, especially trying to feed it people and with environmental degradation.
That may be so, I’ll certainly not argue the point. However the policy itself could only come out of iron fisted central planning 101. State control over the family is a whole lot more draconian than taking over empty housing units bought and sold by “capitalist pigs” which was the point I was trying to emphasize.
Probably a better way to put it is that Central Planning 101 makes a lot of things possible. Some, like the one-child policy, can create massive increases in prosperity, while others, like state-run financial institutions, can create massive policy failures.
The benefit of a weak central government is that you can’t really fail spectacularly. Unfortunately, there are probably some moments in time when you’d like your government to be able to make radical social and economic changes. In response to the collapsing US economy in the 1930s the federal government dramatically expanded its fiscal and regulatory powers, leading to some amazing achievements (Triborough Bridge, start of the interstate system, rural electrification, TVA).
Is this moment in time ideal for a weak central government? Take a look at Congress right now and tell me you wouldn’t want a bit more centralization.
Re: Take a look at Congress right now and tell me you wouldn’t want a bit more centralization.
That’s a very odd conclusion.
Take a look at DC (as a whole) and tell me the country wouldn’t be better off decentralized. When you concentrate all the loot and power into one place all you do is make it easier for the sociopaths to capture it.
Congress – and our one-Party state (the Blue and Red Teams of the Republicrat Party) – is the result of centralization.
I do agree that an outright dictatorship might do things differently BUT (really) what? The system we have now is resulting in the nobility owning the country. What better result could any centralized government want?
“Is this moment in time ideal for a weak central government? Take a look at Congress right now and tell me you wouldn’t want a bit more centralization.”
The New York banking cartel already sits right in the Oval Office where Alexander Hamilton situated his father in law, ages ago.
How much more centralization do you want?
One child being one the best things they ever did?
The jury’s still out on that one. They may have solved a short-term issue (with draconian measures that led to infanticide/distortion of social values), but the solution will have long-term consequences and unintended impacts. We’ll see in 10-20-30 years what the various impacts will be. Social fabrics are complex, and such dramatic tampering will certainly have some results.
Could it encourage war to ‘trim’ the male population? Could it lead to greater social unrest as substantial numbers of men have no chance of marrying? A marginalization of a certain underclass of men? How about the impacts of caring for the elderly?
I realize you referred to the possibility of long-term impacts, but It’s a pet peeve of mine when success is claimed arguably too early. Like the moment when GB claimed “mission accomplished”. Or the WH now claiming success with its stimulus initiatives. Arguably two events that will take many years to judge.
“I realize you referred to the possibility of long-term impacts, but It’s a pet peeve of mine when success is claimed arguably too early. Like the moment when GB claimed “mission accomplished”. Or the WH now claiming success with its stimulus initiatives. Arguably two events that will take many years to judge.”
Too bad Zhou Enlai’s not still around to comment.
We’ve pointed out repeatedly that creditor nations typically fare the worst in severe financial crises.
That’s because there has been no retaliatory protectionism as of yet.
I agree we haven’t seen China experience a bubble burst yet, this might be it.
But also the dynamics of this state capitalism marketplace isn’t fully known either, the Chinese have been strategically stockpiling commodities, why not stockpile housing?
If there are that many vacant units, then what we consider to be market forces aren’t working at all – during the US bubble, units were being occupied, but the buyers just couldn’t afford to stay there for long. After the US bubble burst, the stuff in the pipeline + vacated units created the overcapacity. In China, they are starting with “overcapacity”. Strange bubble, indeed.
On the one hand China finds no “value” in those excess UST, but they seem to have no problem getting credit for raw materials to build new cities and apartments. Methinks the lady doth protest too much.
Perhaps they are using the “worthless” UST’s to buy whatever they can that has permanent value? At least that way they can at least get some return on investment?
While I am certainly no Chinese real estate expert, I do have at least a tiny bit of insight into the market because 1) my girlfriend was born and raised in China, attended Peking University, and is now in America on a research fellowship, and 2) her parents own five apartments in China. I have never talked to her parents directly (they speak very little English), but my girlfriend has clued me into a variety of factors and issues that help to explain what looks to be a Chinese real estate bubble. I’m on my lunch break now and don’t have direct access to my girlfriend, but here’s what I can recall from our earlier conversations.
1) Richard Smith’s analysis pertaining to a 30-year mortgage at 6% interest would literally be laughed at by Chinese people. I can’t speak of commercial real estate, but in terms of private real estate, the Chinese simply do not take out 30-year mortgages…ever. Most take out very short-term mortgages, and most would consider a 5-year mortgage to be long-term. Also, the Chinese tend to make very large down payments (50% wouldn’t be unreasonable). For these reasons, our “Western” mortgage analyses aren’t very applicable to the Chinese situation.
2) To follow up on the previous point, the fact that the Chinese make very large down payments (and sometimes even purchase an apartment with a single lump sum payment) reduces the likelihood that anything resembling the American mortgage crisis could befall China. I don’t mean to beat a dead horse, but debt clearly played a huge role in the American crisis. People were left with $300,000 mortgages on houses that were worth no more than $200,000. Debt both caused and compounded the problem.
In China, however, mortgages tend to be small and many of these vacant apartments are fully paid for. Thus, if housing values were to fall by 50%, Chinese investors would certainly take significant paper losses, but that most likely would not force investors into foreclosure (since the mortgage, if it even exists, is usually very small). In the case of my girlfriend’s parents, four out of their five apartments are fully paid for and the fifth (which they bought a month or two ago) has only a small, short-term mortgage. And just to clarify, my girlfriend’s parents are by no means rich. They would certainly be considered middle-class or upper-middle class (they both have decently paid, government-connected engineering jobs), but they are literally nowhere near the top of Chinese society. The source of their money is primarily…
3) Savings. Chinese society also differs from American (and Western) society in that the Chinese really like to save. Actually, let me correct that, the Chinese really HAVE to save. With no Social Security, no Medicare, and very little in the way of company pensions, the Chinese save to cover all these costs. But here’s where it gets interesting; they don’t necessarily save for themselves, but for their parents and in-laws. In China, children are expected to provide for their parents when their parents get old and are no longer able to work. There are very strong societal pressures to provide for your parents and in-laws, i.e., you would be severely looked down upon if you did not do so. For this reason, among others, the Chinese don’t simply store away 5-10% of their monthly income. They store away just about all of it. When you already own your apartment (and thus do not have to deal with thirty years worth of mortgage payments), one’s savings can grow pretty quickly.
4) Another important point is that many Chinese young adults (at least those in the cities) are not forced to purchase an apartment (at least, not by themselves). It is very common, and actually quite expected, for the parents of a husband to provide an apartment to a newlywed couple. Depending on the family’s financial situation, the new husband may have to contribute to the cost of the apartment, but, like I mentioned earlier, this usually doesn’t entail a large, long-term mortgage. The tradeoff is basically this; parents provide an apartment when their children get married and the children provide retirement income to both sets of parents when they get too old to work.
5) The Chinese stock market also factors into the equation. Upon learning that my girlfriend’s parents own five apartments, my first question was very simple: Why? The reason is because the Chinese stock market isn’t a very safe investment (or, at least, many Chinese believe that it isn’t a very safe investment). Also, savings accounts provide very meager interests rates and there simply are not very many other investment opportunities other than real estate. For those reasons, real estate is just about the only game in town (other than starting your own business, which can be very difficult and which usually requires a number of bribes) if you have some extra money saved up and would like it to increase in value. In the case of my girlfriend’s parents, these folks aren’t trying to speculate and become multi-millionaires, they simply want to save enough money to retire comfortably (even though they will also expect money from their daughter and son-in-law). I can’t say this with any sort of authority, but I think it is a relatively safe assumption that quite a few of those vacant apartments are currently being used for the very same purpose.
6) And finally, despite all of the above (and, perhaps, because of the above), apartment prices are practically out of reach for many young Chinese. My girlfriend has a close friend who attended a top school (and now has a PhD) and is now teaching at the university level at a top school. In most countries, this would almost certainly guarantee a pathway into the middle-class lifestyle. But apartment prices are so expensive and outright fraud is so endemic that he is having a VERY tough time finding a place to live, for a couple of reasons. The first is that entry-level Chinese wages, even for top-notch engineering, business, science, education, etc. jobs, often pay very little. Also, there is an extraordinary problem with fraud in the Chinese housing market. By my girlfriend’s friend’s estimation, something like 95% of the apartment listings online (and even many of those in print) are not what they say they are. You may be impressed by the pictures, but the actual apartment will almost certainly be something completely different and much worse than what was shown. Also, as with many other aspects of Chinese society, the housing market is full of sharks. And since the average Chinese has very little legal recourse against these sharks (because you basically need to know someone in the government to have your case heard), it creates a predatory and inherently dangerous/risky atmosphere.
In other words, the Chinese housing market is incredibly nuanced. Many/most Western analyses, however, are extremely superficial and do not take into account the very unique circumstances and customs of Chinese society. To make an analogy, it would be like the Chinese (who often make 50% down payments and think 5-years is a “long-term” mortgage) analyzing the U.S. housing market based on their own cultural norms and assumptions. Undoubtedly, their analysis would be so incredibly distorted that it wouldn’t resemble the situation on the ground and it would mislead the public about the threats (and lack of threats) in the American market.
I fear that this “birds-eye” level analysis [Wow! Look at these statistics! Look at these numbers! Look at this data!] provides us with the impression of understanding while actually sending us off the in the completely opposite direction.
I think we are saying the same thing actually. My point was that these properties can’t possibly be being financed by salaries, even if you assume a 30-year term; a five year mortgage (thanks for the correction) makes it even more difficult (in fact completely impossible), to fund a property purchase from income.
And thanks for all the input on how families save. However, with prices at 8x *current*, *fast-growing* salaries, even a lifetime’s savings, by a working couple, get used up pretty quickly, buying properties. Perhaps you could check with your girlfriend that the only source of fund is savings? I still think there is something else in the mix. Equity withdrawal on longer-held properties, perhaps?
Thanks for taking the time to post. Information. Appreciated.
Do they rent the apartments out, or are the vacant?
“For this reason, among others, the Chinese don’t simply store away 5-10% of their monthly income. They store away just about all of it. When you already own your apartment (and thus do not have to deal with thirty years worth of mortgage payments), one’s savings can grow pretty quickly.”
It is impossible to save “about all of it”, it just means that they have sources of non monetary income that allows them to so that (think free services provided by the employers or the (local) government, like subsidized food, transportation, etc…). These are entitlements, and my bet is that they are not properly accounted for, and maybe paid by the product of the speculation frenzy : today, just about everybody, from SOE to local government is funding current expenses with real estate linked profit. People are wrong to look at the household level for fragility like in the US; it is at the institutional level.
“The tradeoff is basically this; parents provide an apartment when their children get married and the children provide retirement income to both sets of parents when they get too old to work.”
A “normal level” of rent is 30-35% of income. Divide that by two parents (remember the one child policy) and they essentially have to survive with 15-20% of their child income. I don’t see this flying, unless parent live in the same household, but if they do, it means that average household size will not go down to western level (around 2.1-2.3) but will stay at 2.8-2.9. In that case, they are already enough appartements built for the whole Chinese population, and they can’t afford them at current price !
I thought Andy Xie (谢国忠) was an independent Chinese economist based in Shanghai, but if you’ve been talking to your Chinese girlfriend, of course you know better.
My Chinese wife and I have a 20-year mortgage on a property in Beijing. The down payment was nowhere near 50%.
Let me give you some outdated boots on the ground views. I lived in China from 2001-2006, mainly in Shanghai but with time in Harbin (think Detroit) and Hang Zhou (think Boston). Some thoughts on Chinese housing:
1. Chinese do pay 50% down, or thereabouts; however, many borrow the down payment from friends, family, and the everpresent loan sharks that charge 10% per annum (or more).
2. People “subway ride” to qualify – the folks move farther and farther out of the city core on the subways in order to afford a home, all the while a huge percentage of apartments are vacant in the interiors.
3. You ain’t getting married without an apartment – at least not to an educated girl. This puts extreme pressure on the young men (and their ever-grandchillin lovin parents) to beg, borrow, or steal to get the money for an apartment.
4. The quality of Chinese built apartments is atrocious – I have seen 10 year old buildings I assumed to be 50 years old.
5. Those paying all cash for apartments have used influence to get the cash.
The front cover of today’s Globe and Mail in Toronto was of low-income units being sold via a lottery, with restrictions on income (less than $348/mth $4176/yr)). http://www.theglobeandmail.com/news/world/asia-pacific/chinas-luckiest-people-get-the-keys-as-low-income-housing-arrives/article1661186/
The header stated that the “lucky few are getting the keys”. One family bought a home under this program for $72,500. 17X annual income!! “Lucky”? Staggering. This cannot end well.
Thanks Yves for such a great site!
Perhaps the excess housing is being built for future imported cheap American labor.
Empress Dowager Cixi took the money originally allocated for building the dying, collpasing Qing dynasty’s navy and spent it, instead, on building herself a floating pleasure boat made of stone to look like a paddle boat in the Imperial Garden.
Both the Nationalists and the Communists (or used to the Communists) look back at it today as the manifestation of the ancient regime losing its Mandate from Heaven to rule over the Chinese people.
And so now we have the Chinese government mis-allocating capital to build and hoard empty apartment houses while the masses in the millions go unemployed/unsheltered/unfed.
In the meantime, we can soon recoup our US dollars lost in bilateral trade by taking in fleeing Chinese billionaires with their billions, just ahead of the karmic discovery by some lama of some 5 year old kid with a new Mandate of Heaven to rule. The funny thing is that rational, scientific people all the world will not hesitate to embrace the announcement.
I am sorry, but I have a hard time taking spiritual advices from someone who has attendants to serve him afternoon tea.
Re: The funny thing is that rational, scientific people all the world will not hesitate to embrace the announcement.
HA! So true.
With all the all “isms” and deities sloshing around in people’s semi-psychotic brains is it any wonder they can’t see the sociopaths ripping them off right in front of their noses?!
(It must be great-fun to be one of the elite’s political operatives these days. Making the dumbasses vote this-way-and-that; like running rats through mazes.)
My parents originally came from Shanghai 30 years ago. They went back to China 10 years ago and bought 4 apartments for their retirement. They couldn’t decide which one they wanted most so they just got one in each style. I know it sounds awful. Anyway, I think they paid $300k for all of them with cash. Today they are probably worth $2m. Along with my parents, I know most of my parents’ Shanghainese friends also did the same thing. My point is that a lot of these vacant apartments are owned by overseas Chinese planning their retirement, and not for speculation. If you add up the 50 million plus overseas Chinese, you have a pretty sizable pool of money and influence. So not everything is just as simple as it seems.
It is not the first time that I read this “overseas chinese are a big part of the market”. If it is indeed true, then be very afraid : they are obviously not the one that will riot if their asset go down or if they could get no decent rental return (think government putting a angry poor tenant in your flat at a regulated rent…). The Chinese government will be merciless on them.
If I were your parents, I would follow Baron Rothschild trick of “making one’s fortune by selling too early”.
“(think government putting a angry poor tenant in your flat at a regulated rent…)”
There is no way this will happen. Think of the officials in goverment themselves owns many flats. It is against their own interest.
Another reason for the housing price boom is China is not a renter friendly society. One big factor for real estate in any Chinese city is school (just like US), but renters can send their kids to local school because their legal residence is not there (something called hu kou in Chinese). Therefore, many people are forced to buy apartments, at riduculously price, just for the hope that their child can go to a good school.
I came from a small city in China, my high school classmate actually bought an apartment in the capital city of the province so his daughter can go to school there.