The freedom to buy and sell
Have you ever had your freedom denied? I did recently, and the experience made me not only appreciate the freedom we enjoy in this country all the more, it also brought clearly into focus what our priorities should be.
The entire country and a significant portion of the world is experiencing an economic slowdown that is quickly turning into a world-wide recession. The United States has been particularly hard hit by the collapse of the housing market, leaving homeowners with equity disappearing on a daily basis, high numbers of foreclosures and personal bankruptcies.
As bad as this situation is, Americans at least have the choice to buy and sell homes with a large variety of housing options and very little government intervention.
I traveled to China recently, and learned quite a bit about the real estate culture of the country. The majority of the people live in apartments in high-rise buildings being constructed on every square inch of available land to accommodate China’s enormous population, 18 million in Beijing alone. The only single family homes I recall seeing were some distance from the cities and were essentially farms. The concept of suburban housing as we know it does not exist in China.
And if you’re thinking high rise apartment living doesn’t sound so bad, think again. In China, you can either rent or own an apartment. If you are in a financial position to own, you only own for a period of 70 years, at which point the government takes the apartment back. Forget about leaving anything to your children. Twenty percent down is the norm if you take out a mortgage, and you pay a community tax similar to our property tax.
The average living space for a middle class family is about 400 square feet, which is comprised of two bedrooms, a living room, kitchen and bathroom. In addition, it is not uncommon for two or three generations to live together within the 400 square feet.
Something else that’s pretty interesting – you can’t drink the water in China. I don’t mean just visitors; no one drinks the water. And although hot water is available for showers, it is not available in the kitchen sink. Also, people own washing machines, but no one has a dishwasher or clothes dryer.
Probably the real shock to me was that in China, education, even primary education, is not free to citizens. You must pay to send your child – rmember you are only permitted to have one child in China – to school creating a very competitive atmosphere. Chinese citizens also pay for their health care, which is managed through their employers.
Along the Yangtze River, there are incredible things happening. The water level is being raised to 175 meters above sea level to accommodate the Three Gorges Dam project. This project has essentially flooded entire towns and small cities along the river. The millions of residents living in the flooded regions are being relocated to large apartment buildings in newly created cities being constructed nearby.
No one has asked the Chinese people if they want to move; they have no freedom of choice. The government has made their decision for them. Imagine what would happen in this country if the United States government tried to close down an entire city.
I guess what I took away from my trip is that no matter how bad our financial situation seems, we at least have the freedom to make our own decisions. You can lose money this year, but you still have the ability and expectation to recoup it in the next business cycle. My eyes have been opened and my priorities have been put in order, and it has nothing to do with lost equity.