Christmas and New Years 2011 (part 1)

I took off for the Christmas and New Year's holiday on December 20th, first going to Shanghai by train. I went to a seminar directed towards foreigners on the subject of buying property in China. I'm not considering buying an apartment here but I went because an acquaintance was organizing the seminar and I was curious about the topic.

Two things about property in China are striking. First, the prices have risen rapidly over the last decade, as much as 200% in five years in some cities, so there's clearly a bubble. The other feature of the property market that stands out is that since prices have risen so quickly in such a short period of time, the relative cost of housing compared to the average salary is extremely high in China. In Beijing for example, the average home price was $100,000 in 2006, which is 32 years of the average Beijing residents disposable income. By 2011, the average home price had risen to $250,000, while incomes rose more modestly, so the average home would now take the average resident 57 years to pay off

Reasons for the dramatic rise in prices is a cultural preference for owning over renting property, urbanization and a steady movement of people from rural areas to cities, and a lack of other investment opportunities, as the domestic stock market is valued at half what it was when it peaked in 2007, the domestic bond market is small, it's very difficult for Chinese to buy foreign stocks or bonds, and savings accounts pay less than 1% (while inflation is around 5%). That leaves property and some alternative investments like gold, art and collectibles. There aren't many good places for Chinese to put their money.