One of the reasons for this disparity stems from the different methods of calculating property area in the two countries. In the United States, the area of a house is calculated based on livable/usable space, which is a very important definition. For example, if a villa's basement is not finished, it cannot be counted as livable area; balconies and garages are also not included in the area calculation. The livable area must be the usable indoor space. In contrast, in China, the area of a house is calculated based on the construction area. This has led to the emergence of a new term - usable area ratio. The usable area ratio refers to the ratio of actual livable area to construction area. Nowadays, the usable area ratio of apartments in China is decreasing, with many new homes in places like Shanghai only having a ratio of 70%. Moreover, in many cases, Chinese properties include balconies and other areas in the total area calculation. Therefore, when comparing housing prices between China and the United States, domestic news reports often overlook the fact that Chinese housing prices are based on construction area while American prices are based on livable area.
As a result, housing price advertisements in the United States do not calculate the price per square meter in dollars, because many Americans buy single-family homes, and the price of a villa is influenced by various factors, such as the quality of the neighborhood, the number of garages, and the size of outdoor garden land. Therefore, when viewing houses and prices in the United States, simply looking at the so-called price per unit area is not very meaningful; instead, one should consider the price levels of houses in the entire neighborhood.
Buying a house in the United States typically refers to suburban villas rather than apartments, as apartments are not a mainstream segment of the American real estate market. Generally, single-family homes in the United States have at least three bedrooms, while townhouses start from two bedrooms. Naturally, the more bedrooms there are, the higher the price. Within the same area, housing prices are often proportional to the number of bedrooms, and the price is not calculated by multiplying the area by a unit price as done in China. Just by looking at the approximate price range for several bedrooms, one can get a rough idea. Additionally, the larger the outdoor garden area outside the villa, the higher the total price will be. Since the United States practices permanent land ownership for buyers, the outdoor garden area significantly impacts the total price of the villa.
Therefore, if one wants to compare housing prices between China and the United States, the price per square meter in China must be divided by the usable area ratio. A 100 square meter apartment in China can only be compared to a 70 square meter apartment in the United States. In terms of price, if a Chinese apartment costs 20,000 yuan per square meter with a usable area ratio of 70%, according to the standard unit area calculation used in the United States and other parts of the world, the price per unit area in China should be 20,000/70% = 28,571 yuan. From the perspective of globally accepted calculation methods, the price per square meter of Chinese properties is at least underestimated by 30% from an area standpoint.
The second factor is that there is a difference between bare-shell and furnished apartments in China, while the prices in the United States include various furnishings and renovations. A bare-shell apartment consists of cement walls, cement floors, and pipes, with no kitchen or bathroom fixtures, requiring the buyer to renovate it piece by piece. In the United States, there is no such thing as a bare-shell apartment. Villas or apartments in ordinary middle-class neighborhoods in the United States (excluding slums or high-crime areas) would be considered fully furnished by Chinese standards. In addition to the furnishings, the prices in the United States also include the following items:
1. All indoor decorations are complete, such as flooring, carpets, glass windows, wallpaper/paint, etc., all at a high-quality finish, requiring no further effort from the seller.
2. Kitchen essentials such as gas/electric stoves, ovens, various cabinets, storage cabinets, range hoods, refrigerators, etc., are all included.
3. Bathroom fixtures such as bathtubs, toilets, sinks, shower equipment, wall-mounted storage cabinets, tiles, etc., are all in place.
4. Household washing machines and dryers are included.
5. Central air conditioning is fully equipped, including heating and cooling systems, water heaters, etc.
6. Fire prevention and gas leak warning devices, etc.
7. If there is a garage, then the garage, painting, automatic door systems, etc., are all complete.
When buying and selling houses in China, if it is a new house, these items require the buyer to pay extra for renovations and purchases. In the case of second-hand house transactions, these furnishings often need to be calculated separately. Generally speaking, the costs of renovations and electrical appliances account for about 10% of the unit price in China. In contrast, the prices of houses in the United States include all the aforementioned renovations and furnishings in the total price, rather than being calculated separately; the house is truly ready to move in, saving significant amounts on renovations and common household appliances.
Therefore, to compare housing prices between the two countries, one should exclude these renovation and equipment costs from American housing prices, or the Chinese housing prices must also include the corresponding costs. In other words, when comparing housing prices between China and the United States, in addition to the 30% difference in area, we need to account for at least 10% in renovation and equipment costs. Otherwise, the disparity in the basis for comparison is too large, and from a statistical perspective, if the premise differences are too significant, the comparability is very low.
