Hot Topic: Will China's Property Market Collapse?

This article from iFeng rebuts the claim made yesterday, which said first-tier real estate housing values exceeded all of Japan.

Why Beijing and other first-tier cities are not afraid of Tokyo, Hong Kong's curse

Before the current round of skyrocketing prices, many experts has warned authorities and developers to prevent Tokyo and Hong Kong's property market tragedies. They pointed out that: Beijing's housing prices exceed those of New York, and Tokyo, Japan and Hong Kong, China had rates that exceeded New York before entering a decline that led to collapse.

But the leading real estate enterprise Vanke outflow told a high-level view of the market: through research and analysis, Beijing, Shanghai and other cities are temporarily safe, as the collapse of Tokyo, Hong Kong will not occur.

First of all, New York is the world of real estate, "anchor", the global real estate prices go through with it than to assess the risk. In 1990, Tokyo each housing is 3.2 times the median price in New York, Hong Kong and the highest prices when times are 6 to 8 times New York. Beijing, Shanghai is different, and are only even with New York, higher by 0.5 to 0.8 percentage points, the risk is still in a manageable range.

Beijing, Shanghai and New York is targeting urban core similar cities are large economies. Such final rates and local urban population density, the correlation between the level of local purchasing power is weak, but mainly depends on three factors. Two of the demand side: the total wealth of the economy as a whole (not per capita wealth); the degree of concentration of wealth to the wealthy families. In a supply side: the supply of housing the city's ability (including the development of specific rate, the proportion of residential land and floor area ratio three indicators). This is the basic logic of Beijing, Shanghai housing prices analysis.

Secondly, in terms of the amount of urban development, residential land in Beijing and other cities accounted for urban construction land area was significantly lower than the proportion of New York, Tokyo, and a significantly higher the proportion of industrial land than in New York, Tokyo. In 2010, the land use tier cities in China is much lower than other international metropolis. Beijing, Shanghai, Guangzhou, Shenzhen in 2010, the total size of the urban and rural construction land only 15% to 39% of the urban land area, well below Singapore (90% in 2000) of some other international city, not even reach Tokyo (51 % 1972), Paris (50% in 1970), Seoul (52% in 1972) and other cities of the level of the 1970s.

Therefore, the greater the total amount of wealth compared to New York, Beijing, Shanghai, the higher the degree of concentration of wealth, which means that demand for housing in these two cities will be more vigorous than New York, Beijing, Shanghai housing supply capability is smaller than New York. Thus, three years ago, the study of the leading enterprises concluded: Beijing, Shanghai housing prices, more than New York is a high probability event. By 2015, this has become a reality.

Experts warn, Beijing, Shanghai housing prices higher than New York is final, but if you exceed too much, and that is the meaning of the bubble, if it shattered it is very terrible. Hong Kong indeed was 6 to 8 times New York prices, but that is because of the special nature of Hong Kong (development rate is very low, huge capital flows), Beijing, Shanghai are not comparable. Moreover, prices in Hong Kong after fallen by more than half. Tokyo and Beijing, Shanghai similarity little more, but after 3.2 times the New York prices, also can not afford Tokyo, after the central residential area prices fell by 60%, non-residential building fell by 80%. The case in Tokyo shows, non need to reach 6-8 times, prices more than 3 times is a disaster.

The point glossed over is the per capita income. Both Tokyo and Hong Kong had per capita income that was comparable to New York. Adjusted for income, home prices are already closer to 4 times higher than New York.