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Apartment buildings crowd the skyline in Tianjin, China. (Reuters/Yonhap)

“What’s the cost of a house in Seoul? What are Korean real estate prices like?”

A Chinese friend of mine in Beijing has taken quite an interest in Korean real estate these days.

After graduating high school in Anhui Province in southern China, my friend bootstrapped his way to the capital and then, through a punishing work routine, managed to acquire no fewer than four houses in Beijing, its suburbs and his hometown. That was only feasible before real estate prices began to skyrocket in Beijing and other major Chinese cities.

Despite owning four houses, my friend doesn’t pay any taxes on his property. Since all land is nominally owned by the state under China’s socialist system, the Chinese government doesn’t assess property taxes, or even inheritance taxes, on real estate.

My friend, who is in his 40s, was especially curious about what kind of real estate taxes there are in Korea and how they’re assessed. The Chinese government has been talking about instituting a property tax for more than a decade now, and he wants to know what things are like in Korea.

Another Chinese friend of mine is from Shanxi. Despite being in his 30s, he shares a studio apartment in Beijing with a coworker — a compromise he had to make because of low wages and high rent.

That kind of communal lifestyle is a frequent sight in Beijing. It’s not uncommon for three or even four people to share a single room.

“It’s not comfortable for two adults to share a single room. But after five or six years of it, I’ve gotten used to it,” my friend told me.

For my friend, owning a Beijing apartment is pie in the sky. Apartments in major cities like Beijing, Shanghai and Shenzhen sell for much more than 50,000 yuan (around 9 million won, or US$6,840) per square meter. In some cases, the prices can go as high as 150,000 yuan (27 million won).

While housing prices in Beijing are similar to those in Seoul or Tokyo, salaries are much lower. My friend, a typical office worker with a university degree, makes less than 10,000 won (around 1.8 million won) a month. He could try to marry someone with a house, but given his lack of permanent residency in Beijing, he’s not exactly a catch in the marriage market.

Each day seems to bring a new media report about the severity of China’s real estate crisis. The Evergrande Group, China’s biggest real estate developer, is in danger of defaulting, along with Country Garden. Reports suggest that the two developers going bankrupt would be a body blow for China’s economy. Some observers see a potential repeat of the Lehman Brothers bankruptcy that triggered the global financial crisis in 2008.

But the worst part of China’s real estate crisis is something else — the social inequality that’s being exacerbated by the wealth disparity fueled by property prices. China has a Gini coefficient of 0.5, representing some of the world’s worst income inequality. But wealth inequality is even worse: China’s Gini wealth coefficient (as of 2020) was at 0.704.

China’s property prices have been relentlessly rising for more than 20 years now, producing a severe disparity between urban and rural areas, big cities and small cities, and the eastern and western halves of the country. Without some kind of major change, my 30-something friend will never be able to accumulate the assets of my 40-something friend. That wealth disparity is thought to be one of the main reasons that Chinese people in their 20s and 30s are avoiding marriage and childbirth.

In awareness of those complications, the Chinese authorities have sought to introduce property taxes to ease the wealth disparity for more than a decade, but change has been slow to come. Recently, the tax was pushed back five more years for fear that it would undermine efforts to revive the real estate market, squandering yet another chance to take a step, however small, toward tackling the real crisis.

Please direct questions or comments to [english@hani.co.kr]