[photopress:beiningpropertytoohigh.jpg,full,alignright]The average ratio between housing price and income, an index indicating the degree to which housing is affordable by the local population, is now as high as 9.4 in Beijing, the capital, much higher than the average level of many other cities in the world.
A report released by the Home Link Group (HLG), a noted real estate company in Beijing, said the present housing prices in Beijing, which have exceeded local residents’ purchasing power, will not drop in a short term.
In 2005, the disposable income of each household in Beijing averaged RMB 51,194 ($6,480) and the median price of a second-hand dwelling unit was RMB 480,000 ($60,760).
This means the House Price to Income Ratio in Beijing reached 9.4:1. The World Bank considers the ratio of 5 to 1 as affordable for local residents, while the United Nations set the standard at even lower, 3:1. Figures show such ratio is 3:1 in the United States and 4:1 in Japan.
The HLG warned that this ratio in Hong Kong had been 11:1 before its real estate bubble burst in 1997. In some other Chinese cities, the ratio may be even higher.
A survey conducted by the State Development and Reform Commission (SDRC) shows the average ratio between housing price and income is approaching 12:1 in Nanjing, capital of east China’s Jiangsu Province, one of China’s economic booming towns.
The ratio between housing prices and disposable incomes should reasonably range between 4:1 to 6:1 in developing nations, according to a research done by the World Bank.