Shanghai home prices reached 37 times average annual household income (as compared to a ratio of just over 10 for Tokyo in 1990)

[touchring]

Some food for thought on the scale of the real estate bubble in China. Tokyo 1990 is no comparison.

http://www.chinarealestatenews.com/n...0-07-07/29582/

the first half of last year and this year the second half of the largest price gains in recent years, a period of Shanghai, historical data show that in 2010, Because in April before the housing prices driven forces, Shanghai, the average price average house sold has already reached 260 million, the average annual household income of 70,000 yuan Shanghai 37 times.

http://webcache.googleusercontent.co...&ct=clnk&gl=sg

With skyrocketing land prices, urban housing prices have begun rising in tandem. Generally speaking, the wage income of workers alone can limit the price of the acquisition of building should be the annual income of about 5 times. In 1990, the Tokyo metropolitan area home prices and the ratio of annual income of more than 10 times, in the core region reached nearly 20 times. Even in the Osaka metropolitan area, the ratio of more than 7 times.

If this doesn't sink in, let's compare with the average household income in NYC of $80,000. 37 times of $80,000 will be nearly $3 million for an average home.
http://www.crainsnewyork.com/article...14&cat=economy

Shanghai requires 30% cash payment for first home. 30% of $3 million -> $900,000 CASH down.

[Munger]

Re: Shanghai home prices reached 37 times average annual household income (as compared to a ratio of just over 10 for Tokyo in 1990)

the first half of last year and this year the second half of the largest price gains in recent years, a period of Shanghai, historical data show that in 2010, Because in April before the housing prices driven forces, Shanghai, the average price average house sold has already reached 260 million, the average annual household income of 70,000 yuan Shanghai 37 times.

This must be a typo -- 260,000,000 Yuan = $39,000,000. Should be $2.6 Million Yuan methinks. Which is still way too high.

[housingcrashsurvivor]

Re: Shanghai home prices reached 37 times average annual household income (as compared to a ratio of just over 10 for Tokyo in 1990)

"the first half of last year and this year the second half of the largest price gains in recent years, a period of Shanghai, historical data show that in 2010, Because in April before the housing prices driven forces, Shanghai, the average price average house sold has already reached 260 million, the average annual household income of 70,000 yuan Shanghai 37 times."

That's some terrible math. And the English not so good either.

Having bought in under 7:1 price to rent & under 3:1 price to income, I am so not feeling buyer's remorse today. Tomorrow, who knows? And now I learn that if my value goes down, my cap rate goes up. Win win, sort of.

But these China numbers are disturbing. The first question they bring to my mind is selfish: how would a housing crash there effect the economy here? But also I wonder about the make up of buyers there. Does this really reflect that the buyers are so stretched or is it that the median families are not buying median housing there.

Even here, say 60something% of the population own. When looking at median price, median income, etc., isn't it just the higher end of the spectrum of population buying? Wouldn't it be more the people from median income up, and less those in the median income down bracket who are buying the median priced home. Now to look at the many living in poverty in China who are included in the median household income figure but who could never buy a median priced home there. So in one sense, these numbers are telling, but in another they seem to obscure the relevancy of median price:median household income, when so many more people are below median and thereby unable to participate in ownership of a home near the median price range.

[touchring]

Re: Shanghai home prices reached 37 times average annual household income (as compared to a ratio of just over 10 for Tokyo in 1990)

So in one sense, these numbers are telling, but in another they seem to obscure the relevancy of median price:median household income, when so many more people are below median and thereby unable to participate in ownership of a home near the median price range.

There are equal number of people above and below the median - that's how median works. Since the income gap is wide in China, with wealthy people occupying the upper median, average income is expected to be much higher than median income.

There are many ways to overcome the problem of not being able to buy an apartment, such as living with the parents, or just renting a room. With rents that low versus the cost of getting an apartment, renting is definitely a better option, especially if you are just renting one bedroom.

http://www.globalpropertyguide.com/A.../Rental-Yields

Taking the example of one apartment in Bejing

BEIJING- Apartments	COST (US$)		YIELD (p.a.)	PRICE/SQ.M. (US$)
	TO BUY	MONTHLY RENT		TO BUY	MONTHLY RENT

85 sq. m.

365,585

887

2.91%

4,301

10.44

85 sq m would probably come with 2 bedrooms, each family to one bedroom. So, the rent of $887 will be split between two families - $444 for each family - 2800 yuan, still affordable.