If buying a year’s worth of groceries cost 20 times your annual income, what would you eat? You can’t rent food…
If you (or, more likely, a financial blog like Sober Look) made a graph of residential housing cost vs. average wage, it would look something like this.
And if you’re a very keen observer, you’ll also notice that 7 out of the top 10 most expensive cities for housing are in China. Beijing, Shanghai and Shenzhen take the fancy cake, with Beijing’s numbers reaching way, WAY ahead of even Shanghai.
The numbers mean that it would take an average Beijinger 22.3 years of earnings to pay off their mortgage.
Besides the surprising numerals, this graph also is representative of China’s larger problem — a possible large housing bubble that continues to grow with few signs of a slowdown.
In May, housing prices grew by 6.9 percent, according to Soufun Holdings. Another graph in the Sober Look article shows a startling comparison to U.S. and Spain housing crashes.
According to the graph, China is quickly approaching 12 percent of GDP spent on residential housing investment; the U.S. and Spain were at under 13 percent when their markets crashed.
One last piece of housing news came via Shanghai Daily on June 25: “New home sales in June may beat 1m.” The ‘m’ stands for million, as in one million square meters sold in a month… for the third time this year.
“The purchases of new homes, excluding government-funded affordable housing, jumped 48.4 percent from the previous week to 338,000 square meters during the seven-day period ended Sunday.”
As China Vanke chairman Wang Shi so infamously said when asked if there was a housing bubble on 60 Minutes, “Yes, of course. Very dangerous.”
For more in-depth information about China’s anomalous, complex housing situation, check out an excerpt from Landed China, by Christopher Dillon.