Real Estate Differences Between China and USA

Overseas home buyers are on the rise, and investment thresholds are getting lower and lower. More and more Chinese people are turning their attention to US real estate. However, many home buyers are hindered from understanding the differences between Chinese and American real estate markets and it is difficult to rationally choose investment behaviors: What is the difference between US property taxes and fees in China? What is the difference property rights? Understanding the "Ten Differences in the Sino-US Real Estate Market" will make it easier to achieve the US home ownership target.
1. Urban and Rural Areas

There is a big difference between urban and rural areas in China. There is no obvious difference between urban and rural areas in the United States.

The environment in which people live in China. The city and the countryside are very different. The city is a relatively commercial place where all the institutions are.  Whether you want to shop, eat, work, play, or even see a doctor, you must enter the city. People in the city live in a relatively small space with concentrated population that can be quite congested. But people still want to stay in the city and don’t want to go out of town, because once they are far away from the city, life is very inconvenient.  In China, the city is the city, the countryside is the countryside. In the United States, whether in New York or Los Angeles, there is no absolute difference between the city and the countryside. Only the city center has a small, relatively concentrated place. Others are cities and regions that radiate like satellites. A region has its own system of self-contained systems, shops, restaurants, hospitals, schools, and provides great convenience for those living in the area. People don’t need to do anything to get to the city center.  You can do it in the area where you live. This is the biggest difference between China and the United States.

2. Real estate system

The US system is established with mature system and China needs to improve.

In the United States, there are many third-party agencies to assist in the process of buying and selling houses. There are appraisal companies, house inspections, notaries, banks, and brokerage systems, property insurance companies, etc., each of which is perform their own functions in the buying and selling process to ensure fair and reasonable housing transactions. Also ensure that every step of the buying and selling process is perfect. Making the real estate industry fair, transparent, healthy and prosperous.

China’s real estate business has just started in recent years. It is not a mature established system. There are many potential problems, whether it is the intermediary system or the buying and selling process. The macro-control of the government at different times is unpredictable and makes people feel at a loss. The speculation in the entire real estate market far exceeds the actual demand for real estate.

3. Permanent Ownership Rights

Chinese residential property rights have a period of use, and US property rights are permanent property rights.

Chinese residential property rights have a period of use, and US property rights are permanent property rights.

The United States is a private property system • The sale of houses includes land. When you buy a house, you also buy the land that covers the house. Moreover, the property rights in the United States are permanent, while the residential property rights in China are seventy years. The term of general commercial property is only fifty years.

4. Property Tax

The US has a strict collection of taxes and fees.

In the US, if you own a house, you pay a real estate tax, which is usually 1-4% in the US and 1.2-2.0% in California. Each state has its own different regulations.  After you buy a house, you must pay real estate taxes every year and become the cost of holding your property. This also reduces the vacancy rate of American homes and relatively inhibits speculators’ real estate speculation. We know that there are currently more than 30% of vacant houses in China, mainly because people think of buying a house as speculation. After buying a house, they are not staying or renting, but they are waiting for the real estate market to swell in the short term, so most of the investment houses are vacant. In order to curb the vacancy rate of houses, China began to test property tax in several big cities, but the property tax rate is only about 0.5%. • It cannot anticipate the suppression of real estate.

5. Housing Data System

The United States has an official listing sharing system. China property information is still opaque.

There is a fundamental difference in the real estate market in the US and China, which is their housing data system. In China, there is no single housing data source. Real estate companies only sell their own houses, or exchanges housing information with a small number of peers but the scope is mostly small and limited.  In the United States, there is a real estate sharing system MLS which agent can access. All the houses available on the market are very transparent and can be seen at a glance.  Any agent can bring a buyer to a house for sale and with a different agent representing the seller.  It is an open free market with competitive edge resulting in a booming real estate market.

6. Commission Payment Difference

In the United States, commission is paid by the seller whereas in China it is mostly paid by the buyer.

When the house is sold, the contract is concluded. The commission is generally around 5%-6%.  When the broker brings a buyer to a house, the seller broker needs to divide the commission by half to the buyer’s broker.  Why does the United States stipulate that sellers pay commissions to both brokers, mainly because of the seller is the party that receives the money, and the buyer is the one who pays the money.  In China, the opposite is true. The commission paid by the buyer.

7. Types of Houses

Chinese buyers purchase more apartments, and the United States buyers purchase more single-family houses.

In China, the so-called buying a house means buying an apartment. In the United States, buying a house generally refers to a new or resale single family house. What I want to emphasize here is that the American house is not a villa most Chinese perceives. Although some big houses have the appearance of villas, there are also very old houses in the United States that need to be repaired.  Price varies from tens of millions in a mansion to a $30,000-$50,000 in a total demolition house.  In addition to single family house in the United States, there is also a type of homes called condo. It can be attached multiple units with various floorplans.  The value of this type of condo is generally lower than that of a single house because it occupies a much smaller area than a single house. Of course, it depends on the location of the house and the level of the city. Let’s compare the difference.  The value of houses in the United States in the same area depends on two categories, land and buildings. Buildings will become cheaper as they age, and land will add value based on regional development and environmental changes.

8. Lender Guideline Differences

The United States consumers mostly use fixed interest rate, whereas Chinese consumers have mostly floating rate.

After buying a house in the US, the interest on the loan you pay can be deducted from your personal income tax.  This is a preferential policy of the government to encourage people to buy their own homes. US tax ratio is heavier than China. If you earn $50,000 a year, buying a house worth about $400,000, loan amount $300,000, monthly payment is about $1,800, of which the average interest is $1,200.  Each year is $14,400 at the end of the year, after deducting $14,400 interest, your tax base has been reduced to $35,600, a significant saving.

9. Interest Usage Difference

US mortgage interest is tax deductible.

In China, the so-called buying a house means buying an apartment. In the United States, buying a house generally refers to a new or resale single family house. What I want to emphasize here is that the American house is not a villa most Chinese perceives. Although some big houses have the appearance of villas, there are also very old houses in the United States that need to be repaired.  Price varies from tens of millions in a mansion to a $30,000-$50,000 in a total demolition house.  In addition to single family house in the United States, there is also a type of homes called condo. It can be attached multiple units with various floorplans.  The value of this type of condo is generally lower than that of a single house because it occupies a much smaller area than a single house. Of course, it depends on the location of the house and the level of the city. Let’s compare the difference.  The value of houses in the United States in the same area depends on two categories, land and buildings. Buildings will become cheaper as they age, and land will add value based on regional development and environmental changes.

10. Measurement Difference

There is a difference in US vs China measurement systems.

The units for calculating the housing area in China and the United States are also different. In the United States, square ft is used to calculate the area of the house. China uses metric square meters, 1 square meter is 10.76 square feet; in Taiwan, it is commonly used for Ping, and 1 rating is 3.305 square meters. In the case of American single-family houses, there are interior size and lot size respectively. The interior size is the actual living area, and the lot size is the area of the entire real estate property, including garages, gardens, swimming pools, etc

LILY LIN LY

Realtor
DRE# 01448866