Is buying a high-rise apartment really a case of being "fleeced"?

Today we won't be discussing sound insulation; instead, let's talk about high-rise residential buildings in China. There's a complex relationship between the two, with high-rise buildings often signifying a poorer living experience, primarily due to noise pollution. (The following text is quite long and contains a lot of information; it will take approximately 10 minutes to read.)

According to China's residential design standards, high-rise residential buildings are defined as buildings with ten or more floors.

What does the recent height restriction policy indicate?

If you are thinking of buying a house now, please be cautious about purchasing high-rise apartments in small cities or non-core areas of large cities.

Many people buying high-rise apartments nowadays are primarily concerned with the property's nature: whether it's a commercial/residential apartment or whether it has residential property rights. But these aren't our biggest concerns. Regardless of whether the property rights are for 70 or 50 years, they all face the same issue: whether a 20- or 30-story building can actually be used until the property rights expire.

Some may say I'm exaggerating, so let's look at some of the government's policies on residential construction this year to make predictions.

1. In June 2021, it was stipulated that residential buildings in county towns should be mainly 6 stories high, with 75% of residential buildings not exceeding 6 stories and the highest not exceeding 18 stories.

2. In July 2021, a notice was issued on strengthening the management of infrastructure construction projects and ensuring the safety and quality of projects: the construction of new super high-rise buildings in cities is strictly restricted. Buildings over 250 meters must be registered with the Ministry of Housing and Urban-Rural Development, and buildings over 500 meters are not allowed to be built.

This shows that the country has fully realized that high-rise buildings are a potential threat to the future.

Why are cities with no shortage of land building high-rise buildings like crazy?

Skyscrapers and dazzling lights are considered one of the hallmarks of a city's development; the number of skyscrapers is often a primary indicator of a city's progress. Driven by fierce competition, major cities have been building skyscrapers in droves. Surprisingly, the city with the most high-rise residential buildings in China is not Beijing, Shanghai, or Guangzhou. The top six are Chongqing, Wuhan, Chengdu, Xi'an, Shenzhen, and Changsha.

Aside from Chongqing's unique geographical location, why do many other regions, which have no shortage of land, also build these super high-rise residential buildings? Moreover, many places like to build 33-story buildings, and the law stipulates that building any taller requires many additional building requirements. For example, buildings over 100 meters must have additional refuge floors, positive pressure ventilation (natural ventilation is not allowed), at least three fire elevators, and a large civil defense area.

The construction cost of a typical residential building is around 2,000 yuan per square meter, but high-rise residential buildings can cost over 10,000 yuan per square meter, which is simply not cost-effective. Even a 33-story building is still too high for the average person. Firstly, it's not cost-effective to buy. Lower-rise buildings, especially those with 7 floors or less, have a usable floor area ratio as high as 85% or even 90%, while buildings with more than 20 floors often have a usable floor area ratio of only around 70% due to the need for elevators and shear walls, which take up a lot of space in the common areas. This difference of 15% or 20% in usable floor area ratio translates to a 10% or 20% increase in property value. Furthermore, fire-fighting equipment in most cities cannot reach floors above 30, and even if it is available, the surrounding environment may not be able to withstand the equipment. Therefore, in the event of a fire or earthquake in a high-rise building, self-rescue or rescue by others is basically impossible.

You say the occupancy rate is low, that's fine, you're rich and don't care; the probability of fire and earthquake is low, you who often pray to gods and Buddhas may not encounter them, but the real pain point of high-rise residential buildings is not these at all, it has a fate that is almost impossible to end well: who will demolish the aging high-rise residential buildings in the future?

Will anyone demolish aging high-rise buildings?

concise

Have you ever seen those rows of high-rise apartment complexes in small cities, surrounded by vast vacant lots or low-rise buildings? This is very common in China. When buying, people might feel particularly prestigious, and even if they have to grit their teeth and accept the 30% shared area upon taking possession, have they considered the future? It's not about what the property prices will be like in three to five years, but whether you'll still be able to live there in 20 years. Property prices in China have risen for so many years, and everyone has forgotten one thing: buildings also have a lifespan. Moreover, the first batch of high-rise buildings is about to enter their aging period. First, elevators will frequently break down, then water and electricity networks will require frequent repairs, leading to leaks, peeling paint, and noise from neighbors-all of which directly result in a very poor living experience. For example, buildings from the 1980s and 90s, if poorly managed, are already uninhabitable. These buildings are generally not even that tall, but these current high-rises are all facing similar aging problems, and the future seems unsolvable.

1. Let the developer fix it? That's impossible. The developer only guarantees structural issues, and only for 50 years. That means if the building doesn't collapse within 50 years, they can wash their hands of the problem.

2. So, let the property management company do the repairs? In many older residential areas, people are already indifferent to things like repairing doors, taking out the trash, and cleaning. In the future, if these high-rise buildings need to replace elevators or reinforce them-which are expensive things (in fact, people are already reluctant to do elevator soundproofing and noise reduction), can the property management company still be relied upon? That little maintenance fund is simply not enough.

3. What if the homeowners unite to solve the problem? First, in older residential areas, over 40% of the residents are renters. Many homeowners have already moved to new homes, and the same situation may occur in future high-rise buildings. These homeowners don't live there themselves, and if they're unhappy, it's not their fault, so they have little incentive to make repairs. Renters are even less likely to participate; the property isn't theirs, and if they're uncomfortable, they can simply move.

Buildings in older, lower-rise urban areas are easier to deal with; they can simply be demolished because developers can make money. Demolish a five-story building and build a 30-story one; compensating with a few apartments is nothing. Many previous urban redevelopment projects were done this way: demolishing urban villages with a floor area ratio of around 1 and building residential areas with a floor area ratio of around 3. Developers made money, the government made money, and the relocated residents all profited because there were more houses on the same plot of land. But who would want to demolish these 10-20 story buildings in the future? After demolishing them, are they going to build a 50-story building? Why wouldn't a smart developer just demolish even shorter buildings next to them? High-rise buildings already have a floor area ratio of 3, leaving no room for further profit. High-rise residential buildings have no advantage over low-rise buildings during demolition. Even small low-rise buildings next to high-rises might be collateral damage.

So when you buy a house, you should be careful if there are particularly tall buildings next to it. In many other countries, these tall buildings have now become "slums".

Current Status of High-Rise Residential Buildings in Different Countries and Regions

Will the government bail out these dilapidated houses? The property rights of private residences belong to individuals, not the state. Is it possible that taxpayers' money will be used to repair your houses? So in the end, high-rise residential buildings will just depreciate slowly. After a comfortable period of twenty or thirty years, they will only continue to decrease in price and be sold to those who are willing to accept these inconveniences.

1. For example, in the United States, apart from prime locations like Manhattan, high-rise buildings in slightly more remote areas are so undesirable that no one is willing to demolish them even for redevelopment purposes.

2. The same is true in Europe. Many high-rise buildings were built after World War II, but now they have become slums.

3. The poor living conditions in many high-rise buildings in Hong Kong today are the result of what many high-rise buildings in mainland China will be like 20 years from now. They cannot be repaired or demolished.

4. Singapore does it a little better. It has an old building maintenance and upgrade program called HIP. Because Singapore's land policy is quite special, ancestral homes only have a 99-year lease term. After that, the house and land must be returned to the state. The state spends money to maintain the houses during this period, which is protecting its own property, and it is perfectly reasonable from a legal point of view.

5. Although the land in our country belongs to the state, the property rights of houses are personal, and the state has no obligation to help you build houses.

Will there be more demolitions in the future?

China now has a major policy of carbon neutrality, and it would be better to have fewer people living in high-rise buildings. This is because taller buildings consume extra and unnecessary energy every time water is used, elevators are used, and heating is used, which brings environmental pressure. This is especially true for cities that do not lack land. A bunch of high-rise buildings are suddenly built on large areas of flat land. In the end, whoever takes over will have to bear the consequences of this vanity.

We need to establish an awareness that houses age, and even when buying low-rise buildings, we must consider the future demolition potential, which is a crucial factor when purchasing. Houses in prime, central locations, regardless of height, are less likely to face demolition issues decades later. However, we will likely see much less large-scale demolition in the future. This is because the government has significantly reduced demolition and shantytown redevelopment, shifting its focus to renovating older residential areas. In short, most of the areas that haven't been demolished yet are no longer suitable for demolition.

The government is now requiring the renovation of 170,000 old residential communities within six years, intending to patch up and continue using these communities. Therefore, we will see fewer and fewer people receiving large sums of compensation for their homes being demolished. Perhaps only in cities like Shenzhen, which are truly short of land, will we see people becoming extremely wealthy through such relocation programs.

The main reason is actually the government's judgment:

1. Existing housing can basically meet current needs.

2. The population is not growing.

3. The residential buildings under construction are being updated every year.

There's no need to build another house higher up. The large number of unfinished high-rise buildings is quite awkward. In county towns or areas with ample land supply, the future value of those vacant residences above 33 stories is truly uncertain. Please be extremely cautious if you're considering buying one. Actually, after living in various types of housing, you'll realize that while high-rises may look comfortable to outsiders, they bring a lot of trouble. The most enjoyable living experience is always a large, single-level apartment or a rural courtyard house. If it's also close to your workplace and you have family waiting for you for meals, that's a rational lifestyle.

▍The above text is from short video blogger: Wen Yifei's Emergency Finance