Chi Lo, Chi Time

China’s housing bubble: Now you see it, now you don’t

November 9, 2016 - Chi Lo

The concerns about China’s housing market are focused on two questions: 1) how big is the bubble and its corresponding systemic risk; 2) can the government manage the potential fallout?

While there is froth in China’s property market in the major cities, the rest of country’s housing market is stuck with a severe inventory overhang. Outside the four Tier-1 cities (Beijing, Shanghai, Guangzhou and Shenzhen) and five Tier-2 cities (Tianjin, Chongqing, Chengdu, Wuhan and Xiamen) where housing prices have been rising by an average of more than 20% YoY, prices in the rest of the country have risen by about 6% YoY only. The Tier-1 and Tier-2 cities together account for 28% of the property market (in terms of transactions). With such a divergence in the property price performance and market segmentation between the cities, is China’s property market really a bubble?

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