China: New Born To Inherit 4 Homes

Stephen Chung

Managing Director

Zeppelin Real Estate Analysis Limited

April 2007

What! How? These are perhaps some of the initial reactions from reading the title above. China, an emerging economy, can give its new born 4 homes while many households in developed countries are still struggling to pay off the mortgages on their first one. Unbelievable! Are we talking about homes made of straws? The KISS (keep it simple and straight-forward) answer is that first, we are not talking about straw houses and second, we are not saying ALL new born will have 4 homes. Yet, many new born, the urban ones especially, can expect to own and possess 4 homes when they enter adulthood. The hypothesis has to do with the 1-kid policy and here is a simplified description of the process: 

A)     The current middle-age generation = is the last generation, more or less, to have several siblings (brothers and / or sisters). While life experiences vary from person to person, some of them have saved and prospered enough to buy and own their own homes (affordable housing, commodity housing, former company housing etc). Let us assume here a married couple owning theirs and they have 1 child (son or daughter) born after the 1-child policy was put in place. Let us also assume that they intend to pass on this home to the child when they eventually pass away. For simplicity, let us also deem that there will be no major claims from grand-parents, who are likely to pass away even sooner than the parents, or any relatives, or for that matter, any tax authorities. In short, this single child gets to own the whole thing when he or she gets older.


B)     The first 1-child generation enters adulthood = they are maturing and are beginning to have an impact on the economic, social, administrative, and cultural landscapes. Obviously, not all single kids would have home-owning parents. Yet, for simplicity, let us assume one who has such parents who in turn will leave him the home to him or her now or in future. This means he or she does not need to worry too much about needing a place for shelter = it may not be his or her preferred choice, but the single kid can always fall back on it or exchange it, via selling and buying, for another home. Now, assume this kid some years down the road will meet someone whom he or she will marry. Also assume this spouse to be another single kid with home-owning parents who again would leave the home for inheritance. Presto! This young married couple would have (expectations of owning) 2 homes to start with. Naturally, there usually will still be 2 sets of parents + 4 sets of grandparents to deal with and in Chinese custom, the .wife・ will usually move in to the husband・s home (which may also accommodate the hubby・s parents etc) while the wife・s parents (and grandparents) would continue to live in the wife・s home. In short, no immediate financial benefits (not even rental income) but expectations of assets (thus wealth). Let us also deem this young couple will have 1 kid in future (in keeping with the policy).


C)     Zoom we enter 2032 (25 years from now) and the 2nd generation 1-kidder has also grown up = His or her 1st generation 1-kidder parents, assuming no further real estate purchases and no squandering of assets at the same time in the years hence (and no divorces etc), collectively shall own 2 residential properties and can pass these onto their single child, now also grown up. Assume this youngster is to meet another youngster whom he or she would eventually marry, and assume this spouse has similar 1st generation 1-kidder parents with 2 homes, then zap! This 2nd generation single kid couple will have expectations of owning 4 residential properties altogether. Even if these are to be occupied by parents and grandparents, the probability of having 1 or 2 of such properties becoming available for rent etc to generate immediately some financial benefits is higher than in scenario (B). Even if not, the 2G 1-kid young couple could still look forward to having 4, in all likelihood, free and clear largely mortgage-free residences. In short, the financial freedom offered to this couple is greater and as such may mean significant generational economic-social behavioral changes.


Naturally, we are not experts in family education or personal growth, though sometimes giving too much to youngsters may actually deter their character enhancement, but this is outside the scope of the article. The main point is that there will be relatively well-off and young households in future which may harbor certain implications to real estate developers and home builders.

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute for proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein.                                

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