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Wealthy only on paper

October 9, 2012

konjaku: this is a follow-up to the article in the previous post.The aim of these articles is to dissuade readers from thinking that sudden wealth could happen to them, or to envy “instant millionaires.” However,  in the process of making the argument, there are some cogent criticisms made of the whole demolition and renewal process.

Millionaries wealthy on paper –the relocated rich lead to fears of social disharmony

2010-08-22

Source: Jinyang net–Yangcheng Evening Paper (Guangzhou)

http://news.sohu.com/20100822/n274383428.shtml

Last week , there was a newspaper article which was widely reprinted. In Tianhe district, villages in Xintang city were demolished, and over 2000 people became millionaires through the compensation they received. Among these was one villager, who had just one three story old building of about 60 square meters.According to the “one demolished, one supplied” rule of  compensation, in which the surface area of each floor is added together to arrive at the amount for compensation, he had 190 square meters total. After relocation he was still able to buy an additional 60 square meters of land at a fixed price of 3500 yuan per square meter, for a total of 260. His son, who lived apart from him on another property, had some 380 square meters of land. Together, father and son had over 600 square meters. The going price for commercial property in that vicinity was 12,000 yuan per square meter. Even calculating at 10,000 yuan per square meters, both households had become millionaires.

As previously disseminated through the media, in Liede village in Zhujiang new city, there is a story propagated of instant millionaires due to demolishing and relocating. The going market price for land there was 20,000 yuan per square meter. There were some households with 2000 or more square meters, and some multi-family households with a much as 4000 square meters. It was not rare for people in that village to have over 1000 square meters of land.

In Panyu county Shilou town Yousantiao village, in the process of building the Asian Games Village, 583 village households were transformed into millionaires overnight.

A case in Shenzhen caused people to cluck their tongues in surprise. According to reports, in the rebuilding of Futian District Gangsha village, most of the villagers selected the option to acquire a replacement home as their compensation. The replacement home for one family was 6000 square meters, and in that area the going price for real estate property was 30,000 yuan per square meter! There were ten families whose net worth approached a total value of 100 million yuan.

Om 8-20 the People’s net published the editorial, “Exaggerating to an excessive degree –the illusion of sudden wealth because of demolition and relocating ( http://www.hb.xinhuanet.com/fangchan/2010-08/20/content_20681522.htm). This editorial states that if there are some cases of sudden wealth, they only occur in large cities [with a large resource base]. Rather, it is more likely that the citizen’s property rights are difficult to safeguard in the process of demolition and relocation, leading to them being more worse off than before. It concludes that much of what is true and untrue about this phenomenon of suddenly wealth remains to be clarified through discussion. Those who become millionaires are only millionaires in terms of the calculated value of real estate property they have acquired as their replacement housing.

As has been reported, if a person wants to convert this to cash, they have to sell their real estate (the residence they relocated to). In order for the real estate to become a  disposable commodity on the real estate market, the land must be made to change  its status, from ownership in the village collective (in perpetuity) to state owned land. Then selling off their property means losing the original status of the land and the capacity of that land to continue to be a resource for the owners. In Liede village, an absolute majority of the villagers were unwilling to change their real estate to state owned land.

As has also been reported, when villages existing in an already urbanized area are demolished, it causes the prices of newly developed housing in the area to soar.

As the Daily Financial News stated bluntly: “Be on guard against high real estate prices.”

Reporter: Na Lantuo

Editor: Mei Zhimin

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Note: the  “one demolished, one supplied” rule in which the surface area of each floor is added together, applies to buildings under three stories. There is a different calculation for buildings of four stories or above.

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