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| Cities in Danger of Housing Bubble |
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The price-to-rent ratio for second-hand houses in some of China's big cities have gone over the international warning line, said the 2007 real estate blue paper released by China Academy of Social Sciences (CASS). The price-to-rent ratio, or the rent for one sq. m. of floor space divided by its sales price, is an indicator of real estate market move, said Shan Jingjing with the research center of urban development and environment protection of CASS, adding that the lower the ratio is the better the housing market does. A rapid increase of house prices combined with a flat renting market can signal the onset of a bubble, said the researcher. The report shows that the price of second hand houses in most large cities including Beijing, Shenzhen, Shanghai and Hangzhou soared in 2006 while the renting price were stable. In these cities' downtown areas, the ratio reached from 1:270 to 1:400, according to the report. "The international warning line is 1:200. Once the ratio goes over the line, the market is in danger of a bubble," said Shan. The researcher estimated that driven by strong demand and high land and new house prices, China's second-hand house price would continue to rise with a slower growing rate. (Xinhua News Agency May 5, 2007) |
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