The China Property Bubble

by: Tim Iacono

If you’ve not already seen the study by Yongheng Deng, Joseph Gyourko, and Jing Wuu that appeared at voxeu the other day and you still think there’s not a problem with real estate prices in China, you might want to go read that paper. The one chart that stood out for me is below along with a conclusion that should strike fear into any recent buyer.

Click to enlarge

To provide some insight into just how risky prices and price-to-rent ratios are at these levels, we calculated what would happen if people began to expect that their homes would grow in value by only 4% per year. For Beijing, prices would fall by over 40%, absent offsetting rent increases or other countervailing factors.