How should you calculate the books for a house?

Recently, in the “15th Five-Year Plan for expanding consumption” expansion, the government included housing consumption in “consumption of durable goods for big-ticket items,” grouping it together with cars and home appliances. Many people are anxious again. I’ve gotten lots of comments in my inbox asking me to analyze what this shift in tone indicates. Honestly, if you’ve followed my articles for a long time, you’ll know whether the state labels it or not doesn’t affect the essence of housing. Since 2022, every article I’ve written has been telling everyone to get rid of the idea of holding onto a house. Those historical articles are there—can’t fake it. And now it’s 2026, nothing has changed.

Why? Because if you really算清楚 the “house账” (the financial accounting), you’ll find that as long as it doesn’t surge wildly upward—and as long as you don’t add high leverage—then it’s basically a consumer good. In other words, you only have “big-risk gambling,” and only if you win the gamble can you claim it’s not consumption; otherwise don’t even think you can make money from it.

Let’s quickly do a simple calculation. You have 10 million, buy a house outright. We assume annual depreciation of 1% (we’ll undercount). After 20 years, when you sell the house, it still has 8 million left, right? That’s the most normal calculation.

You might say: what about demolitions? An old home becomes a new one? First, it’s not necessarily demolition. Second, even if there is demolition, it doesn’t necessarily make you money. You pay per head to expand the household size, exchange for more square meters and more units. Your premise is that the house keeps going through periods of explosive price increases—that doesn’t become a win unless prices rise continuously. So you can’t include that.

Your most basic living cost is about 100k per year. If your annual income is 100k, then you’ve essentially been living at a loss. It’s just that the housing depreciation damage is only settled when you sell—unlike rent, which gives you real-time bodily “feel.” But it doesn’t change the fact that you’re still living at a loss, meaning you’re sliding down the social ladder.

Someone said: if I don’t buy, don’t I still have to rent? Why don’t you mention saving the rent? Okay, okay, let’s calculate rent. Same house: let’s say annual rent is 300k. Over 20 years, you’ll pay 6 million in rent. It looks like a lot. But after living 10 more years, you’d be able to “buy the house” with rent, right? Don’t forget: the 10 million you used to buy the house doesn’t have its own return anymore. If you can get 3% per year on 10 million, then you can “live for free.” Not only do you not lose 100k in depreciation—you still have more costs to consider: property management fees.

For a 10 million house, annual property fees of 20,000 to 30k don’t seem excessive, right? For ordinary property management, not even that great. What about renovation? Basically, you’re paying from your own pocket (it’s not offset). When you sell, that premium generally can’t be added back into the house price. So your living cost might exceed 150k per year. And if I rent instead—even if the annual rent is 300k—it’s still just “pay rent to live.” You live in the exact same type of house; I live in an identical house. Can you calculate the difference?

So even if the house rises 2% a year, “it looks like you’re making money,” but you still haven’t truly made money—you can barely avoid a loss—because when you sell, there are all kinds of transaction costs that get deducted. Unless what? Unless you crank up leverage.

For example, buy with a down payment of 30%, or even 20% (5x leverage). Then the price increase is magnified, and only then can you make money. But is 5x leverage any less risky than what happened when Koreans borrowed money to buy something like Hynix? (海力士) The fate of Koreans is already there for everyone to see. Earning money in a house doesn’t mean you’re impressive—it just means you got lucky and escaped death. This is not a victory of investing.

And not to mention: if the house doesn’t rise—or even falls—then calculate your living cost. It’s far more than 150k to 200k per year. You might make 500k a year, but you still don’t have enough to cover the house’s losses. It’s just that this loss and the resulting social decline don’t produce real-time “sensory feedback.”

Now you know why a house is considered a “big-ticket durable consumer good,” right? It’s not because the government labels it that way; it has always been that way.

Making money from a house requires the house to be in a persistent trend of explosive price growth, and everyone has to use leverage. What kind of victory is that? It’s surviving a gamble. If a house only rises slightly, it doesn’t have the function of preserving value.

Someone else said: okay, then I buy a house and rent it out. If the rental income covers the mortgage, doesn’t that mean the tenant is paying my mortgage, and decades later I’ll get a house for free?

Alright, let’s help you calculate again, using real data from a certain residential community (an example from practice). I’ve also seen this one: the price is about over 100k per unit. You can rent it for a bit over 600k per year. Property management fees are about 70k per year.

Assume you use 8 million as the down payment (principal), and pay back 600k per year in mortgage. It looks like the tenant pays the loan for you. So how much do you lose per year?

First, property management is 70k. Second, depreciation is about 300k per year. Third, you can invest the 8 million principal at 25,000 income per year (assuming 25,000). Then there’s renovation: I’ll estimate 3 million, which means you’d still have to pay on the order of 100,000+ per year.

See that? You buy a house and rent it out. It looks like the tenant pays the mortgage. But even after you receive the rent, you still lose about 800k per year. And if the tenant isn’t always fully booked—if the place is vacant for half the time—then you’d lose over 100k per year.

And this is assuming the house price holds steady without falling. If it keeps dropping, then get ready to liquidate. Because the 8 million down payment can’t withstand many percentage points of decline.

At this point, the accounting involving houses is basically done. Today I calculated this not to tell you not to buy a house, but to answer the questions from friends in my inbox. They think it means “when the government defines houses as X, what does that imply.” But it’s not. If something is what it is, then it’s what it is. This isn’t because the government labeled it; it’s just what it originally is. You need to see clearly what social class you’re in, how much money you have, what kind of house you’re consuming—not stumbling around without accounting.

Someone said: as more paper money is created, house prices will certainly rise slightly in the long run, so buying a home with a loan is definitely worth it. In the future, the mortgage payments will keep becoming smaller.

If you want to say that, then you might as well borrow money to add leverage for certain stock index products, then pay the loan off little by little each month. No matter whether money is flooding or not in the future, the return is unknown how much higher than housing you’d get. Even in China’s most疯狂 period for real estate, no one rose as much as those leveraged index positions. Since you put down the down payment and thus got yourself levered, compare returns under the same premise—leverage. Indices can also be levered; and you don’t even necessarily have to actively add leverage. There are already such products available on the market to buy.

Finally, I’m not asking everyone to add leverage anywhere. I’m just trying to make people a bit more clear-headed: the cost of living in a house is very high. And in China, many ordinary people are actually living in houses they shouldn’t be living in. But because they don’t know how to calculate, their social status declines without them even realizing it. That’s the key point.

#GUSD年化升至3.8%