Month May 2010

Unspoiled Weishan

Just 55km outside Dali, lies a quaint little town called Weishan. Its name, Weishan, comes fromweibao, treasure, and indeed it is precious as a remnant of classical Chinese life even more authentic than either Dali or Lijiang’s. In the 14th century, Weishan was an important center for tea trade on the ancient Tea Horse road. Built during the Ming Dynasty by emperor Hongwu, it was laid out like the chessboard game “weiqi” that he loved so well.

The first thing I noticed was how clean and quiet this town is. There are not many cars since the streets are so small. This is still mostly undiscovered and void of tourists. The walking streets are lined with little shops and restaurants.  Unlike the touristy Dali, food and accommodations are less then half the price. We stayed in a new hotel in the center of the old town directly on the walking streets. Built like a traditional home, this was a perfect find. Our nice room was 100 RMB a night. Same thing in Dali would run at least 300 RMB. The hotel name is Mong She. Another thing of note is the complete lack of mosquitoes here. It was amazing to sleep with all the windows open and not use any chemical. Although the bed was normal Chinese brick design, I slept well as it is so quiet in this town.

The next morning we headed up Wei Bao Shan mountain just outside of town. This is a famous religious location that was quite interesting. The mountain comprises over 20 temples that you walk to as you ascend to the peak. It takes about 3 hours to do the trek. Approaching one temple, I was struck by the sound of beautiful music. It was to perfect detail to this beautiful setting we were walking through. Going along the pathway through the pine trees with these temples nestled along the way was really a real China experience.

We arrived at the temple where the source of this music was coming from. Looking around, I realized it was a recording. I found this lady there and asked her about the music. She didn’t know anything. This was music played on a guozen. See pictures.

Suddenly I ran into the lady pictured here. Her name is Chong Hui. She tells me this is her music she has just recorded and will release on DVD. I asked her for a copy and she said she only has the master now. We sat down and had tea with her and I learned of her stoory. She is 34 and has been playing and painting since 17. Her artwork was hanging up in the temple. She is also a Tai Chi master. While we talked I found out she is having a website made now by the Chinese govt to feature her arts. She wanted to give me a copy of her master disc, but she can’t use a computer. So I stepped in and gave her a PC beginner’s lesson on her new PC. We had a good time visiting with her there, but I could not make a copy because she has no blank DVD’s. But she will send someone to Kunming to give me a copy soon. Once I get it, I will post it to play on my website. So check back and listen in. Once her website is up, I will also link it to mine. Her artwork is also very good.

After leaving Weishan, we headed for Dali for an overnight before returning to Kunming. This little town is definitely  worth a visit. Plan an overnight here at least.

The Art of Real Estate in China

As many know, China is in the midst of a real estate boom rivaling anything in the world. People are getting filthy rich by the virtual minute here buying/selling. But this is a different world here when it comes to buying property and a very uncomfortable process for a westerner going about it.

There is no such thing as “looking” at property to buy here. If it is physically available to look at, you’ve already missed the boat price wise. That is because everything is purchased before a stone is turned. You get to look at some drawings or possibly a model of what a future development will look like. Everything is sold 1 year in advance of any actual construction. If you want to look at existing property to buy, it is easily 2 to 3 times the price.

So I will best illustrate how this works based on my own personal experience. It is typical of how it all goes down all over China.

First you get info that a developer will start a project, and that the pre sale date starts in such and such. You arrive at the “sell office” which will have a model of this completed project or maybe just drawings of floor plans of the units being built. They have slick printed booklets of the facilities and artist concepts of the finished development. At this time, no construction has started nor do they usually know when it will happen. From this info you are able to choose a size and floorplan to purchase. Many times you can also pick the exact unit you want on the model, but this is not always the case. Now you pay about 10% cash up front and receive a single piece of paper that identifies you as a “future owner” of said property.

A year later, and they are at the building phase maybe 70-80% completed. Now you go in and through a lotto system will get to know exactly which unit you will get. As I said before, sometimes you get to pick this in the beginning. Here they also will have “altered” the price you will need to pay for the property. There is no such thing as a “lock” when it comes to property prices or bank loans in China. But now at this point you will know the final price you will pay. This is usually 20-60% more than what they told you when you put in the deposit. If you don’t like it, then that’s too bad. If you walk away, don’t expect to get any deposit back. There are another 100 people to come in and take what you give up.

But at this point is where things get interesting. Right now you are holding a piece of paper that secures your purchase. Even when they raise the price, it will still be lower than the current real value. Property values go up an average of 2% per MONTH in China. So now your option is to stand fast and wait for the the day you come in and pay 100% up front to own your property. This is usually within 3 months of it being completed.  And this is where millions of people in China are getting very rich. They put their paper on the market to sell. You can get at least double what you have paid in the deposit. In my case, 14 months after I paid $5600.00, I am being offered $66,000 just for my paper. Look at the number carefully. I did not make a mistake. Thats a profit of $60,400.00 for doing nothing or really owning anything. So do the math, buy 10 of these properties a month and it becomes major $$$ in a hurry.

Ok, so I will not sell my paper and will wait until my property is complete. Now I pay the full price of the property and they hand me the keys. At this point I can sell it quickly (1 week) for at least double what I paid. Or, I can sit on it for 6-12 months and sell it for 3 to 4 times what I paid. In my case my property has tripled in value since I bought it 14 months ago. It still is not finished, but they said it will be worth 4 times what I paid when it is finished end of 2010. I have no doubt this will be the case.  I bought it for my own use, so I won’t be playing that game.

So, needless to say, the govt is trying to control this since it is fueling the housing prices into a bubble. They decided to impose a tax on property that is bought and sold within a 24 month period. Actually all this did was let the govt in on the profits. You can still re sell it, and now this tax is simply passed on to the new buyer. Doesn’t effect you at all!

Recently the govt added another rule since the first one is not so good. If you take a bank loan to buy this “second” house, they spank you with a higher interest rate. Third house, higher still. In any case, if you need a bank loan, under the best circumstances you are getting screwed. The loans are all ARMS only. Plus you cannot pay off early without penalties. Then they only allow you a 5 day window per year to make a pay off. The whole loan business is stacked against you big time. If you don’t have cash, it’s not a good idea to go house buying.

Now what do you actually get when you buy new property? It’s easier for me to list what you DON”T GET.

  • no warranties so you better do research on the builder/developer
  • no walls, floors, interior doors,electrical,lighting or fixtures of any kind. (You do get a front door)
  • no insurance. If it burns, just walk away.

The short of it is, property comes only unfinished. When I say unfinished, I mean unfinished. You get raw, rough structural walls and floors. Plumbing is stubbed to the wall and capped off. They have windows, so at least it is sealed from outside weather. Very basic electric like maybe a high amp line run into the kitchen, or a single light switch in a room. It is essentially just a box shell ready for a complete interior. At first you may think this is a load of BS. I know I did. However, there is some logic to it. You are 100% free to redo every detail of your new property from stem to stern. Since walls are solid concrete, you would want to do the electrical and plumbing things before anything else anyway. They got to cut channels in the walls to lay wire and pipe. Then re cement over them again. A real mess.

So you go get an interior designer and get it on! This is refined to a fine art in China. These guys are amazing at design. You get modeling, hi-res graphic rendering, and muti media presentations of your remodel.  You change and re change 100 times until it is a perfect detail of your dream house. Then they handle it all down to the finished home. What all does this cost? That’s the cool part. It is nothing close to what you would expect in the US for this work. In my case, our home is 3 stories and 2200 sq ft. For me to turn this into a Bill Gates or Taj mahal over the top completed remodel, I can expect to pay between $36~50,000. In the US it would be in the neighborhood of $200,000+ for the same thing easy. And in the end you end up with a killer home!

The pics are my “development” being built in New Kunming City. It will be 1km from the city center. The lakes, rivers and gardens are all private property for my use. Natural spring water swimming pools, clubhouse, restaurants, hot tubs, sports center and shopping mall. Shopping mall will be public. Beautiful views of the mountains and only 2km to Dianchi Lake. New lite rail train service to Kunming (15km) and to the new airport to be completed end of 2011 which stops right in front.

When it is all said and done lets compare values. I will have a 2200 sq ft  townhouse completed and remodeled ready to move in for approx $147,000. Easily 1/3 the price comparable in the USA. Plus, when you buy in China, you pay tax of 2% up front. Then no more taxes ever. Paying utilities is the only on going expense.

Hmmm… so why do I live in China? Let me sit back and think about that one a little while.