Five big Chinese cities rank among the priciest housing markets in the world, surpassing notoriously expensive cities like Tokyo, London, and New York, based on calculations by the International Monetary Fund. In fact, seven out of 10 of the world’s least affordable markets–Beijing, Shanghai, Shenzhen, Hong Kong, Tianjin, Guangzhou, and Chongqing–are now in China.
Note that that the price-to-wage ratio, which measures median housing prices in a given city against median disposable incomes, reflects affordability rather than the absolute property value. This means the mid-range price of an apartment in New York is 6.2 times more than what a typical family makes in a year. By comparison, it would take nearly a quarter-century of earnings to buy a pad in Beijing’s capital outright.
Residential property is a big mess for the Chinese government–and it’s not going away. Last month, prices on new homes leaped 7.4% in June 2012–the biggest uptick since last December.
In short, policies to curb housing inflation aren’t working. That’s worrying news for the government; housing prices are a major source of public resentment. The danger isn’t just the threat of popular unrest, though: It’s that soaring property prices make people feel less wealthy and less inclined to consume. And that’s exactly what the government needs them to do in order to wean the economy off its dependence on exports and credit-driven investment.
Sure, the announcement over the weekend that the government will stop evaluating party officials solely on the basis of their contribution to growing GDP. If they’re off the hook for hitting targets, it could make them less reliant on land parcel sales–the prices of which have been rising–to fund their budgets.