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China Housing Market Is On Life Support

China Housing Market Is On Life Support

We must understand the housing market in China to fully comprehend how wealth is stored by many people in China. To those looking in from the outside, the housing market in China appears a house of cards ready to collapse at any minute. It is also a market sector that has become greatly oversized that it may now account for 25% or more of China’s GDP. Because it has become so ingrained in China’s economy we find that the Chinese government has no choice but to shore it up while at the same time trying not to encourage its growth.

Prices Have Soared In Top Tier Markets

China has over 680 cities but four are considered to “rule supreme” and are viewed as the best; Beijing, Shanghai, Shenzhen, and Guangzhou. As in many countries, the supply of housing falls well short of demand in the top cities, leaving many people increasingly stretched to buy there. The average price for a one-bedroom apartment in Shanghai is nudging towards $1 million. The  job magnet metropolis of Shenzhen is no bargain either, at about $700,000 for a flat.

A clear sign something is wrong is evident in the findings of an analyst for economic research firm Rhodium Group that estimates around 90 million apartments across China are sitting vacant. This indicates a huge oversupply in some areas of the country and unaffordable homes in certain cities. For years, developers have put up large apartment blocks in isolated parts of China. This was done because the land is less expensive in these areas and under the concept “if you build it they will come,” but often, they have not.

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