An awful lot of my conversations with locals here in Ningbo and with students here at the University of Nottingham Ningbo, China campus have been about buying and renting apartments and the real estate sector in general. Its a topic on the forefront of many people’s minds and in each of these conversations I learn something new, not least because each conversation I have, I understand the Chinese terminology better. One piece of information however that I could not get out of anyone, was what would happen to their apartments once the lease-term of the land on which the apartment building stands runs out (for residential properties leases run for 70 years).
As an avid reader of Dan Harris’ blog, I was thrilled to find a translated version of China’s Property Law on his website. Surely the answer to all my questions would be in here I assumed. Somewhat naively, as it turns out, as the law remains largely silent and “intentionally vague” on many issues precisely because they are so hotly debated and therefore “intentionally leaves many issues for later resolution”.
One of the issues left for ‘later resolution’ are the terms of renewal of land use rights for residential properties. The current wording of the law, which has been in effect since 2007, states that all “land use rights [for residential properties] will automatically be renewed according to relevant state regulations”. What does that mean for someone who owns an apartment? Absolutely nothing! The government could decide to renew the lease for free or could decide that the land goes back to the government.
Since none of this will become a real issue until 2050, as the PRC only adopted land leasing as the basis of land use rights in 1990 (and leases run for 70 years), there is still a lot of time for the CPP to work out all the details. However, several rumours have already been floating around the Internet as to what the terms of renewal might be, the most concrete of which assumes a renewal fee of about 1300 Yuan per square meter in Beijing. On one website alone, tens of thousands of people voiced their disagreement regarding this issue – we are obviously in dangerous territory here.
So, my guess is that the CPP is very hesitant to make any decision on this matter out of sheer fear of upsetting tens or hundreds of millions of people. However, lets just for argument’s sake assume the government did decide to charge roughly 1000 yuan per square meter for lease renewals in all of China – the potential revenue for the government would be in the trillions of yuan. So, under no circumstances can the government afford to give this opportunity up for nothing. The only question left for them to answer is how much they can charge without causing significant dissatisfaction.
