Look east

Read in ‘Ghost Cities of China’ (2015) of Wade Shepard:

People are complaining about the steeply rising housing prices in Amsterdam. They know it’s nothing compared to cities like London, New York City and even San Francisco, which are much worse. Do they know that housing prices in the Chinese cities are the highest in the world? According to the IMF’s house price-to-wage ratio, China’s big cities are, relatively speaking, some of the most expensive in the world in which to buy real estate. The ratio measures median housing prices in relation to median disposable income to calculate the minimum amount of time it would take for an average resident to pay for a property. In ‘Ghost Cities of China’, Wade Shepard explains why. Commodity houses in China are free-market properties that can be bought and sold at will, prices are not capped by the Chinese government. “According to this evaluation method, China, including Hong Kong, has seven out of the world’s top ten most expensive cities for residential property.” In Beijing, it would take 22.3 years to buy a property, in Shanghai 15.9 years. That is twice as high as in Tokyo, three times higher than in London, and four times higher than in New York City.

Fifteen years ago property developers didn’t exist in China. Prior to 1988 land transactions were even not permitted. Shepard explains how the Chinese government has created a market for real estate in the mid nineties. Two years later the Chinese private housing market exploded. “As could be expected, prices surged.” By 2010 its property market was already the largest in the world. In four years time the cost of real estate in China tripled. In 2012 alone people in China spent over US$1 trillion on real estate. The Chinese love real estate, they want property. The house is now the main indicator of status. ‘No house, no wife’, they say. It’s not a bubble, Shepard stresses; the demand is real. China has one of the highest home ownership rates in the world. The faith that the Chinese have in the value of housing is unflappable. Other viable financial options for investing money are extremely risky. That makes the Chinese into the greatest city builders of the world. So the West better stop complaining. Build cities. Look East!