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March 10, 2010

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Blaming house bubble on mothers-in-law

IN addition to being a menacing bubble of epic proportions - and one that is still inflating - China's runaway housing market provides fertile ground for jokes, good and bad.

However, when statistics seem to lend credence to jokes we find patently silly, we should ask the question: who's being silly in the first place?

A recent poll by, a real estate brokerage Website, found that nearly 80 percent of Chinese mothers insist on home ownership by their future sons-in-law - the most important precondition for marrying their daughters, the China Economic Times reported on Monday.

After surveying middle-aged mothers in eight Chinese cities including Shanghai, Beijing and Tianjin, pollsters found that only 18 percent of respondents approved of renting as an alternative to buying an apartment for cash-strapped couples. The rate varies across regions. Twenty-seven percent of prospective mothers-in-law surveyed in Beijing said they would settle for renting; while in Shanghai, this percentage only stands at 12 percent, the report said.

The report concludes by saying that most Chinese mothers wouldn't give the green light to marriages without apartments. The survey's conclusion, while perfectly within expectation, is still noteworthy, as it appears to lend statistical support to one academic's seemingly ridiculous observation that "mothers-in-law are the driving force behind China's unrelenting real estate boom."

Barely half a year ago the views of this academic, Gu Yunchang, were dismissed by many as "complete hogwash." Gu, a veteran observer of China's real estate market, on September 3 pinpointed what he said was the root cause of China's skyrocketing housing prices.

"Rigid demand is long held to be an important reason for soaring home prices. But an even more profound reason for the unyielding real estate fever is the 'acutely rigid demand'," Gu told a real estate forum in Chengdu, capital of Sichuan Province.

Asked what he meant by "acutely rigid demand," Gu said a mother who pressures her future son-in-law - regardless of his financial difficulties - into purchasing an apartment is a typical example of "acutely rigid demand."

This demand is not susceptible to influence by outside factors, even core factors such as a person's wage level, he said. Gu is deputy secretary-general of the China Real Estate Association and deputy director of Policy Research Center at the Ministry of Housing and Urban-Rural Development.

While speaking with conviction, he did not produce a shred of evidence to back up his claim, nor did he examine the asserted link between demand for apartments required by mothers-in-law and a steep rise in overall home prices.

Even newly publicized data can only partially prove his points.

Of all the new home buyers in Shanghai last year who secured bank loans by leveraging their personal housing reserve funds - the part of one's salary that is set aside as a benchmark of credit one can get from banks - home buyers under 30 years of age represented 42 percent, the biggest proportion.

Among this age group, 90 percent of people are saving for their first homes, mostly for marriage, the Oriental Morning Post reported on February 27, citing a government report on public reserve fund management in 2009.

Although somewhat buoyed by data, Gu's logic is flimsy. In the case of Shanghai, the government report doesn't provide anything beyond mere figures, for example, whether these 42 percent of buyers were forced to become "mortgage slaves" at their mothers-in-law's behest, or whether they ran up debts of their own volition.

No existing data reveals the extent to which mothers-in-law's clear obsession with wedding apartments has fueled dramatic price hikes.

Prenuptial duty

Admittedly, while Gu's views cannot be demonstrated by numbers, they are supported by general perceptions and vast anecdotal perceptions about mothers-in-law demanding wedding apartments. We all know his assertions are half right in real life - whether they cause the high prices is another story.

This is especially true in Shanghai, where young men, often along with their parents and grandparents, are obliged to shoulder the onerous, unwritten prenuptial duty of buying apartments.

Failure to show one's prospective mother-in-law that desired house - often no less than 100 square meters these days - could wreck an engagement.

I understand the fervor with which many mothers-in-law cling to the apartment. Should break-ups occur, their daughters at least can receive as alimony the equivalent of half the home's value. But since when has possession of house become a prerequisite for matrimony, one that sullies the couples' vow "till death do us part" at the wedding ceremony?

If this house fetish persists, will this marital pledge be changed into "till house do us part"?

Apart from lack of statistical evidence, the fact that Gu's views were denounced is perhaps not so much because of what he said, but because of the way in which he aired his views - in a calculated move to provoke his audience so that his antics could bring him publicity.

Gu's distasteful home price theory that blames it all on "snobbish" mothers-in-law is an updated version of earlier nonsense that claims to examine the "culprits" driving up home prices. The most common "culprits" are "damsels," (unmarried young ladies), "only children" and "budgetary housing."

What Gu and others like him share is a tendency to obfuscate the true cause of China's exorbitant home prices. They find it a lot easier to bash the "rigid demand" of certain groups than take on the land-hoarding, profit-seeking official-developer nexus that lies at the heart of the housing predicament.


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