Some things to consider if you’re a homeowner, or considering buying a house in Beijing:
A China Daily article cites a report by the Golden Keys real estate agency that claims the "ratio of home price to income in Beijing is now 27 to 1, five times the international average."
The ratio was based on government statistics and calculated using the average annual income of a family with two wage earners in Beijing (approx. RMB 60,000) measured against the RMB 3.04 million (!) that is now the purported average cost of an apartment in the capital.
Ever the optimists, the National Statistics Bureau refutes the ratio, claiming that after "usage costs like taxes, maintenance, expenses, which are much lower in China" are factored in, the ratio should be much lower – around “three to six times” a family’s annual income, based on "international standards."
What the article does not explain is exactly how much lower “taxes, maintenances and expenses” are here in China and precisely how they affect the overall ratio (but I’ll grant that in general, utility costs and even the cost of furbishing a new apartment is indeed lower than in most developed countries).
In any case, all this is hardly reassuring. Simply put, the reported RMB 3.04 million average cost of an apartment in Beijing (which still seems surprisingly high to me) just goes to show that there is still a glut of overpriced housing here in the capital and not enough apartments available on the lower end. And what’s even more certain is that there remain far more lower income families than not.
Meanwhile alibaba.com reports housing prices have reached their highest levels since 2007 and a recent decline in housing sales in the latter part of August is due to "buyers waiting for housing prices to drop." Despite the buyer uncertainty, Chinastakes.com warns "a large number of developers are still purchasing land and arranging finance, preparing for a new round of increases, but prices could also fall depending on the government’s credit policy" – a trend the report deems "crazy" on the part of the developers.
All told, this is encouraging news for prospective homebuyers as housing prices could very well drop in the coming months. But how this bodes for the long-term stability of the Chinese economy could be a far different story – especially if the freewheeling lending continues and real estate developers start defaulting en masse on their loans (sound familiar?) …