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The Disproportionate Rise of China’s Real Estate Market 中国房地产市场不相称的崛起 Dezan Shira writer Nicholas Hopper looks at lessons from developed economies to assess China's swamped real estate market, questioning the apparent lack of alternative investment options. 协力管理咨询的作家Nicholas Hopper着眼于从发达经 济体的经验教训中,以评估中国衰退的房地产市场, 质疑明显缺乏的其他投资项目。

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hina’s real estate market has seen massive development since it’s opening to private investors in the late 1990s. This rapid development, not unlike that seen in the United States before the 2008 crisis, is a risky one for several reasons, which we get into below. For one, the disproportional value of real estate prices compared to the average citizen’s wages and standard of living has become cause for concern in today’s China. This can be seen when comparing office rental prices across various locations to each country’s GDP per capita, as illustrated by the graph (inset). Taking New York City as a baseline, Shanghai’s ratio is more than eight times as high, Beijing seven, and Guangzhou nearly five. Real estate markets in emerging economies often see disproportionate valuation increases mirroring the hopes and expectations that investors have towards the country; with financial centers of such economies especially vulnerable to such speculation. The overvaluation is usually corrected when the market saturates and growth rates return to a sustainable level. Shanghai is of course one example illustrating this effect, and Mumbai is another. Taking into account average national purchasing power parity, an average Chinese worker would need to save every yuan of their income for over 230 years to be able to afford a 100 square meter apartment in a prime location in Shanghai, according to a recent Knight Frank LLP report. This is topped

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REDSTAR September 2012  

The REDSTAR Bar & Nightlife Awards 2012, an exclusive expose on Qingdao's art scene, Chengdu travel, music coming up in September and Octobe...

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The REDSTAR Bar & Nightlife Awards 2012, an exclusive expose on Qingdao's art scene, Chengdu travel, music coming up in September and Octobe...

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