A four-year property increase in China has elevated a collection of little-known cities and turned them into real estate gold. Beijing has decided to make them home to the millions moving from rural areas but there is a matter of concern about whether China’s educated middle-class is quickly being priced out of these so-called second-tier cities.
The average household debt-to-income ratio in China soared to a record 92% last year from just 30% a decade ago. Chen Gong, the chief researcher at independent strategic think tank Anbound Consulting said, “A property bubble is foaming up in many places in China.”
“Prices are starting to look abnormal when compared to residents’ income,” he added. A 26-year-old IT engineer says the lack of affordable housing is forcing him to consider moving from Xiamen. “I’m getting paid like I’m in a small city but when I’m looking to buy a home, the price is the same as in a metropolis,” he said. “It’s just impossible.”
A 1,000-square-foot apartment in downtown Xiamen is almost as expensive as the average home in London. In the home to the headquarters of tech giant Alibaba Group Holding Ltd, Hangzhou home to the headquarters of tech giant Alibaba Group Holding Ltd., prices per square foot now rival Seattle, where Amazon.com is based.
Some 90 million people have been relocated from rural areas since 2012, encouraged by better job prospects and policies aimed at giving migrant workers social welfare that’s more similar to urban dwellers. Some local governments have facilitated access to schools and hospitals, privileges traditionally enjoyed by residents born in those cities.
Meanwhile, owning property is something of a national obsession in China after price gains in the early years of this decade made hundreds of thousands of people rich, at least on paper.
As per China Real Estate Information Corp, the average house price-to-income ratio rose to a record in 2018, despite Beijing’s efforts to keep a lid on prices. A citizen of London will have to pay around 13 times their annual salary to purchase property in the U.K. capital.