In spite of intensive cooling measures introduced by the Chinese government, residential property prices have risen for 9 straight months and figures from China’s National Bureau of Statistics show prices increased by an average of 12.8% year-on-year in the 70 cities tracked.
It now takes a persona earning the average Chinese household’s income 17 years to buy a typical 100 m² home in one of the major cities such as Shanghai or Beijing, which is seven times the recommended ratio of 2 to 2.5 times annual income.
This is in spite of the fact that around 64 million apartments and houses lie empty, due to the government building the equivalent of 10 new cities a year. These are generally highly priced and in remote parts of China and have effectively become ghost towns. The largest mall in the world, the New South China Mall is 99% vacant, and has been since it was opened in 2005.
The prices of homes in China have increased significantly more than those in other countries, and although some believe that China’s spectacular growth will absorb the excess housing supply, others have their doubts.
Property here generates low rental yields and the more canny investors feel that the risks are now too great, especially as the government is committed to introducing further measures to deter speculators. There is also concern that the economy cannot continue to grow at around 8 to 10% a year.
China has foreign reserves of $3 trillion, which were built up through spectacular GDP growth based on exports and manufacturing. A recent report from the International Monetary Fund suggests that China will become the number one world economy within five years, but it doesn’t fit the conventional idea of a superpower as there is enormous disparity between rich and poor.
Although the country is sitting on massive reserves, the average American is about 10 times as wealthy as the average Chinese.