Property Owners Feel
Right at Home in China

BEIJING -- Sun Guangxin is moving on up, from a cramped government dormitory to a deluxe apartment in the sky -- or at least the seventh floor.

Decades of communism were supposed to suppress the desire to have a home of one's own. But these days, owning a house or apartment here is a badge of pride -- a far cry from the Cultural Revolution, when property owners were persecuted.

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Sun Guangxin's new place in the Beijing apartment complex 'Sunny Corner.'

This Friday, as China's lawmakers wrap up the annual meeting of the National People's Congress, they are expected to pass a landmark property law. It's expected to put on paper what has already been true in practice: China is a land of private property, with some of the highest rates of home ownership in the world. In 1985, before China embarked on housing reform that allowed urbanites to purchase their state-owned apartments at cheap prices, privately owned homes accounted for less than 17% of urban housing stock. Since then, China's rates of home ownership are as high as 80% in the cities, according to some estimates -- topping U.S. homeownership rates of about 69%.

A fire sale of millions of apartments held by state-owned enterprises has transferred an enormous amount of wealth into private hands, creating a new class of urban property owners. These new homeowners have been willing to band together in law courts and tenant organization to fight for their common interests, such as increasing the quality of service provided by property managers. Many advocated for the passage of the property law on blogs.

"The development of China's real estate industry changed Chinese people's way of life and also changed China's economy," says Gu Yunchang, professor and vice chairman of the China Real Estate Research Association and an architect of housing reform.

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Sun Guangxin, left, will move into his apartment soon

The proposed law is intended to bring together and clarify those regulations already on the books governing property ownership. It is also designed to help China's legal system better handle an increasingly freewheeling market economy that is still ruled by the party whose Chinese name literally translates as "the common property party."

The symbolic value of a law enshrining private-property rights in a country that is still nominally communist has sparked a heated debate over China's identity. The property law was expected to be passed last year, but it was tabled by the leaders of the Communist Party after strong opposition. Critics fear the law abandons China's communist roots and will further aggravate the already growing income gap between rich and poor. It does little, for example, to help the majority of Chinese who are still farmers living on land leased from the state. Land confiscation has sparked riots across China's countryside. But there are some practical elements of the law that are expected to help further increase the ranks of private-property owners.

One of the key provisions: the new law appears to allow leases on land to be extended forever, meaning families could potentially pass on property to their children, for example. In China, the state still owns all land, and home buyers and business owners are only able to lease it for 70 years or less. Lease holding is common in countries like the United Kingdom, where there's a clear legal precedent for how to renew. But China's patchwork laws left unanswered what the future could bring.

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A billboard promotes his complex beside the site.

That worried people like Yin Na and her husband, Larry Liang, a young white-collar couple who just bought an investment rental property in a huge project being built in Beijing's commercial district.

"I paid attention when I read they'll automatically renew the 70-year lease," says Ms. Yin, who now feels more reassured thanks to the new law.

The hunger for a place of one's own has helped ignite China's real-estate market into levels that some worry could overheat. In the past two-and-a-half years, prices for the sort of mid-market, mass housing Mr. Sun bought have soared 40% in Beijing and 30% in Shanghai, says Anna Kalifa, head of Beijing research at real-estate firm Jones Lang LaSalle. While there are plenty of speculators -- and local regulations to curb them -- around 80% of purchasers are buying for their own use. "There have been huge wealth gains. People complain about rising housing prices, but the flip side is massive wealth creation," says Ms. Kalifa.

The real-estate boom has had a huge impact on the economy. City skylines are a forest of cranes, and property prices are rising as high as the new towers being built. According to Euromonitor, since 2001 the market for home furnishings in China almost tripled to $37 billion last year. There are plenty of commercial real-estate buyers as well -- including investment banks such as Morgan Stanley and Goldman Sachs, which have invested millions of dollars into towers in Shanghai's bustling commercial districts.

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All this was unimaginable less than a decade ago, when nearly everyone in the cities lived in state-owned housing provided by the government as part of cradle-to-grave welfare.

Shortly after the Communist Party took power in 1949, all property was nationalized. Housing was distributed along with work. By the early days of economic reform in the 1980s, urbanites were living in cramped, dilapidated apartment blocks, badly maintained by the state-owned companies which couldn't afford to upkeep on the few pennies tenants paid for rent.

Then, during the economic downturn sparked by the Asian financial crisis in the late 1990s, then-Premier Zhu Rongji sought to turn the untapped housing market into an engine of economic growth similar to the U.S. and started selling off state-owned apartments at a fraction of their market value.

Mr. Sun, a 24-year-old who works as a trade development official for the government, spent the earliest years of his life living with parents in the poor countryside of China's northeastern Shandong province. Then, they slowly started climbing up the economic -- and property -- ladder. Eventually, last year, they were able to help their son with the down payment on the modest two-bedroom apartment in the eastern suburbs of Beijing, where old factories are getting torn down and replaced by vast new apartment complexes.

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Yin Na and Larry Liang bought an apartment as an investment.

"Owning my own home will give me a sense of belonging," he says. At a purchase price of about $40,000, the apartment's mortgage takes up a little more than half of his salary, though it has already appreciated in value, he says.

Standing in the unfinished concrete shell of his apartment, Mr. Sun points to a computer-generated design of his new apartment on his MP3 player (which also displays photos): a light-purple living room with a large-screen television, and light blue and light green for the bedrooms. "I want everything modern," he says.

But for Mr. Sun, the most important part of the property law is that it will protect the place he can call home -- and where he plans to host his friends to watch a soccer tournament on his new big-screen TV. And in six years, when he's 30 years old, he wants to move up again, "to a place with 150 square meters, or maybe two apartments -- one just for my parents to come visit," he says.