Many people know that today’s housing prices are getting higher and higher, but what exactly constitutes the high housing prices? I'm afraid most people don't know much about it. Let me tell you what components house prices consist of and how much money developers can make.

At present, there is a simple and straightforward calculation formula for commercial housing prices in China: "3+3+3+1", which is "30% of the land cost + 30% of the construction and installation cost + 30% of the reported price." Construction, administrative expenses and taxes + 10% developer profit." Next, I will analyze it part by part:

1. Land cost: accounting for 25%-30%.

Land cost is also called land transfer fee. Land is a scarce resource for the entire society and a non-renewable resource. Therefore, the transfer fee of foreign investment is higher than that of domestic investment. The transfer fee of commercial buildings Taller than residential buildings.

The land cost in housing prices refers to the floor price. Simply put, it is the average land price per unit building area. It can also be understood as the land cost included in the selling price per square meter after a house is built on the land. Floor land price can most truly reflect the unit land cost price included in the unit price of the building.

2. Construction and installation costs: accounting for about 30%.

Construction and installation costs are a relatively stable part of housing prices. It is the abbreviation of house construction costs and house facilities and equipment installation costs.

The cost of house construction is the investment in building a house, which can be divided into three parts:

The first part is the upfront cost.

Mainly include three connections and one leveling expenses and special expenses. The cost of three connections and one leveling refers to the funds invested in leveling the land in the building area to provide water supply, electricity, access roads, etc. The investment in this cost for the construction of large-scale or immature communities is considerable. Special expenses refer to the overall planning, room design and other expenses paid to the design company. If the developer pays attention to investment in this area, it will bring benefits to itself and consumers.

The second part is the civil construction cost.

Many houses look similar on the outside, but their actual quality is very different. This is mainly reflected in the cost of civil construction. Although the cost of frame structure, multi-layer piling, and cast-in-situ floor slabs is relatively high, the quality of the house is also better guaranteed. As the saying goes, you get what you pay for. This is what it means.

The third part is the cost of supporting facilities.

This part mainly includes the funds spent by developers on water, electricity, gas, greening, health, education, etc. In the current environment, greening rate has also become an important criterion for measurement.

The installation cost of housing equipment is the investment in installing housing facilities and equipment, both of which include material cost input and labor cost. This part of the cost may be higher than that of a fully furnished house, but compared with the overall construction and installation costs, it is not much higher.

3. Sales expenses

Refer to all expenses incurred by the developer's management personnel from the sale of real estate to the delivery for use. Sales expenses such as advertising, sales office construction, intermediary agents, etc. are also components of the real estate price.

4. Management costs of developing real estate: accounting for about 5%.

Including operating management and sales expenses. Refers to all expenses incurred by the developer's management personnel during the process from real estate sale to delivery. Sales expenses such as advertising, sales office construction, intermediary agents, etc. are also components of the real estate price.

In addition, because most developers will choose bank loans to solve the problem of capital investment in projects, this generates interest. If banks lower interest rates, the burden on developers will be reduced. Although it will have little impact on housing prices, it can relatively reduce costs.

5. Taxes: approximately 25%.

Mainly occurs in planning, construction application, pre-sale and other links. There are 13 types of taxes directly related to real estate, mainly including corporate income tax, business tax, urban maintenance and construction tax, education surcharge, land value-added tax, stamp tax, etc.

According to agency calculations: Assuming the market value of the house is 1 million yuan (unit price 8,000 yuan/square meter, area 125 square meters), the taxes borne by this house are as follows. In addition, there are urban land use tax, deed tax, property tax or urban real estate tax. We won’t go into details here.

Simply put, for a house with a total price of 1 million yuan, the relevant taxes and fees may be close to 25% of the house price.

6. Profit: accounting for about 10%.

The income gained by real estate developers is a source of funds for enterprises to expand reproduction. How much profit is left? It is a huge point of contention for every enterprise. The higher the profit margin, the lower the financing and development costs of the enterprise, and this depends on the capabilities of each developer.

From the current point of view, the profit ratio of real estate companies is relatively clear among listed real estate companies, but the current situation of listed real estate companies themselves is not optimistic. Statistics show that 53% of corporate net profits hit the 10% red line last year, and it is expected that the real estate industry will become a profitable industry this year.

Of course, these are static structures on the books. The land development process is dynamic. Generally, the development cycle of the first phase of a real estate project is two years. During the two years, the floor price will change, but the cost will basically remain unchanged. As floor and land prices appreciate during the cycle, developers’ profit margins will also increase.

In general, the floor price, construction and installation costs and taxes are the most important components. These three items directly determine the construction cost of the house. There are many dynamic factors that affect the market price of commercial housing, which will change with the continuous development of the national economic situation and market environment.

(The above answer was published on 2017-02-08, please refer to the actual relevant current house purchase policies)

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