Shanghai Housing Prices Completely Unsustainable

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Shanghai Housing Prices Completely Unsustainable

The original version of this article made the mistake of comparing dollar prices with Chinese yuan, giving a false comparison between Shanghai and New York real estate prices as a percentage of median income. These numbers were corrected in the first two graphs of the article. The full corrected version appears below.To get more shanghai real estate, you can visit shine news official website.

Every year China investors are given the warning that Shanghai housing prices are out of control. They have been rising precipitously now for at least a decade, with an average 1,000 square foot apartment in Shanghai going for $725,000, or around five million yuan. Shanghai's average salary per month is 7,108 yuan ($1,135) or 85,300 yuan a year. That puts local property in Shanghai at about 50 times median salaries in the city. Housing costs in Shanghai are unsustainable.

Let's compare that to New York, the most expensive city in the United States, where the median income is around $52,000 a year and an average 1,000 square foot apartment will cost $1.7 million based on square foot prices of $1,756. By that measure, housing prices in New York City are 32 times salaries of average New Yorkers.

Of course, New York is a world class city. It has money from all over the world flowing into its real estate. The same cannot be said for Shanghai. Shanghai is arguably one of the up and coming Asian money centers. It's no slouch. But most of the money into real estate there is local. Wealthy Chinese buy homes as a store of value, driving up prices to ridiculous levels.

According to cost-of-living data provider, Numbeo, Shanghai is less expensive than New York, outside of housing. Locals would need more than double their monthly income, or at least $3,300, to maintain the same standard of living as a New Yorker earning $7,300 a month. Even London is cheaper than New York for rich Chinese, with Shanghai urbanites needing the same amount of monthly income -- $3,365 to be exact -- to live like a Londoner on $5,578
Rent prices on a dollar basis are higher in Shanghai than they are in other world-class emerging market cities with similar incomes. Shanghai is 19% more expensive to rent than Moscow real estate; 74% more expensive than Sao Paulo and 121.8% more costly of a rental market than Mexico City.

Shanghai is no New York, and yet the Asian power city has become too expensive for average Chinese who have a hard time financing first time homes while rich Chinese are onto their third and fourth property.

China's property market in its major cities continued to last month after the government took a string of measures to curb double digit housing inflation, judging by numbers published this weekend by the National Bureau of Statistics (NBS).

Of 70 large and medium-sized cities surveyed by NBS, more than half either saw a month-on-month price decline or a mild price uptick of less than 0.5% for new housing. Among those cities, 12 of them saw a month-on-month price drop, with new residential housing prices in two cities remaining flat.

NBS said that new home sales prices in Beijing and Shanghai rose 0.1% on average in February compared to January, while second and third tier cities so 0.25 and 0.3% price increases.