Residential Real Estate Prices in Chinese Cities

Over the past year 10 cities in China have seen residential real estate prices rise by an alarming 23%, by comparison during the height of the housing bubble in the US the highest year-on-year growth figure recorded by the Case-Schiller 10-City Composite Index was 20.5%. And while some cities have experienced shockingly high growth – Shenzhen has seen housing prices rise by a staggering 53% in the last year – most Chinese cities have seen housing prices rise less than 2%. This pattern of rapid and unprecedented housing price growth in a few locations raises concerns about a housing bubble in China’s largest cities.

The Chinese real estate market now has two tiers – megacities mostly near the coast like Beijing, Shanghai, Shenzhen, and Guangzhou with rapidly increasing prices, and small to medium sized cities that have experienced more modest real estate price growth. The difference between residential real estate prices in high-growth and low-growth cities started to expand rapidly in May 2015, right before stock markets in China began to collapse; an event which likely increased the division between high and low-growth real estate markets as investors fled equity markets to supposedly safer housing investments in China’s largest cities. Another factor adding to this price divergence is the glut of housing units in third and fourth tier cities and the relative undersupply of residential units in larger tier one and tier two cities.

By selecting a time period within the above chart this bifurcated market can be visualized. Initially the time period is set to December 2010 to May 2016. During this period the enormous increase in housing prices that has been experienced by China’s megacities is clearly evident, as is more moderate growth in smaller cities. However, adjusting the date selection to the most recent year shows that almost all of the divergence between property markets in high and low-growth cities occurred over the past year, whereas in years past residential real estate prices tended to move together across all Chinese cities. The scale of the rapid increase in housing prices in a few of China’s largest cities while other cities remain stagnant is staggering.

Since December 2010, the first month where data are available, 10 cities have seen residential real estate prices increase by 20% or more, with Wuhan on the low end at 23% and Shenzhen taking the lead at 107%. During this time period housing prices have increased 45% on average in these 10 cities, versus just 5% for the other 60 cities covered by the National Bureau of Statistics of China. The chart below shows how most of this alarming divergence has occurred rapidly over just the past year.


This two-tiered market structure will create headaches for policy makers Beijing who will have to simultaneously support real estate markets in some cities and restrain property markets in other cities, meaning policies will have to be tailored for city-specific circumstances. In low-growth cities the government will attempt to convert excess housing stock into social housing and provide incentives and subsidies to individuals to purchase new homes. In high-growth markets like Shenzhen and Shanghai local governments are attempting to restrain price growth through stricter lending regulations and increasing the supply of land.

After last year’s meteoric rise in housing prices in a few cities, Beijing’s greatest challenge, or worry, will be preventing an equally precipitous fall in residential real estate prices. In a slowing Chinese economy a bursting housing bubble could cause stock markets to stumble and prompt investors to pull capital out of stock and housing markets only to bankroll China’s next economic headache. And if last years rapid rise and subsequent fall in Chinese stock markets is any indication, investors should prepare policy missteps and a bumpy ride ahead.

Another version of this post and map was published by Foreign Policy here.

About Chart:

Data: Sales price data of newly constructed residential buildings comes from the Chinese National Bureau of Statistics. Data was originally indexed to the previous month; R was used to manipulate the data to be indexed to December 2010. For more accurate data on the Chinese housing market check out the NUS-Wharton-Tsinghua Chinese Residential Land Price Indexes here.

Map: Geographic data for the map was downloaded as a shapefile from the Database of Global Administrative Areas and converted to a smaller topojson file using this website. Longitude and latitude for the cities was gathered using the R package ggmap.

Interactivity: D3 was used to make the webpage interactive and these sites/examples by Mike Bostock provided guidance: 1 2 3.

The files to and code to create this map can be found on GitHub

People of Dhaka

Oarsman, color

(Taken while riding a small ferry across the Buriganga)

While writing my thesis on two cities I love – Mumbai and Shanghai – I learned that Dhaka was the densest  city in the world, about 1.3 times as dense as Mumbai. Knowing only this one fact about Dhaka was enough to make me decide that I’d be going to Bangladesh for spring break. Cancun isn’t really my thing anyways.

I went there to understand what being the densest city in the world means, which was rather naive because I was only going there for two weeks, by myself, with no plans, and not knowing much about the development of the city. It felt just about as dense as Mumbai or like crowded parts of China, so in the end it wasn’t its density that struck me, it was the people that lived there.

In all my travels I’ve never been asked by so many people to take their picture, I’ve never had strangers buy be tea, and I’ve never left my debit card in an ATM only to have a man find me minutes later and hand me my card with $200 he had accidentally withdrawn with it – that could have ended much worse.

Anyways, here a few of the pictures from that experience.

Tree boy

On the banks of the Buriganga in Kamrangirchar, Dhaka.

Proud with age, curious with youth

I had just taken the younger man’s photo, but he was still curious about the lens.


You don’t need to be in focus to see a clear smile.

Toll collector

(A toll collector sits on the banks of the Buriganga)

Jamaat supporters

The quality of this picture isn’t great, but the moment I took it sticks with me. About 500,000 Jamaat-e-Ismali supporters had rode up from Chittagong to protest in Dhaka against “Zionist and Atheist Bloggers” and trails against some of their members for war crimes committed during the Bangladesh Liberation War. No women were allowed in the protest, they were calling for death to the “Zionist Bloggers”, and yet they were incredibly nice to me. I believe they mistook my skin color and larger camera for the telltale signs of foreign media – I was even allowed up on a bridge overlooking the protest with “other” members of the media. That’s when these three approached, shook my hand, and asked me to take their picture. They smiled, then went off into the crowd.

Boy at Ahsan Manzil

A movie fan, probably.

Bother and Sister?

This is the only female who asked me to take her picture.

The Oarsman

It cost one taka to cross the river ($1 = ~75 taka at the time). Normally the oarsman will wait to fill up his boat with passengers before crossing but as soon as I got in he pushed off. He smiled, was nice, then motioned for me to take his picture. When the lens when up a stern look replaced his smile. I was more than happy to pay to have the boat to myself just to get this picture.