Econintersect: In the U.S. the rise of average home prices by 50% over the four years from 2003 to 2007 (annual rate of 10.7% compounded) has been considered the mother of all American housing bubbles. This year several Chinese cities are showing price gains year-over-year that are between 16% and 20%. This certainly sounds like a bubbly market.
But the housing market in China has a very volatile history and prices have bubbled before. In 2007 there were quarter-over-quarter price increases around 13% for each of the two final quarters of the year. That was followed by four years with single digit y-o-y gains and modest price declines in real terms throughout 2011 and 2012.
The Chinese housing market has been very volatile as the following roller coaster look-alike demonstrates. China seems to bubble every few years and the past “collapses” have quickly stabilized.
Note: The following graphs do not include 2013 data.
The following graph showing the Shanghai Second-hand House Price Index gives a clearer picture of how the price spurts have not been followed by significant declines.
Can the previous pattern of post-bubble stabilization be repeated yet one more time?
- China Major Cities Home Prices Surge, Raising Bubble Concerns (Bloomberg News, 22 October 2013)
- Shanghai housing market (Global Property Guide, China)