Economists warn China's housing bubble could burst
World Bank economists have warned a real-estate bubble is among the biggest economic risks China faces.
The warning came at a Beijing press briefing on Wednesday. It noted residential prices are heading downward in some major cities, damping some undesired real-estate speculation but raising the prospect that the Chinese economy may slow more rapidly than anticipated, with consequences for global growth.
Ardo Hansson, lead economist at the World Bank's Beijing office, said China should consider boosting interest rates further to tame consumer prices and head off bubbles in housing and other assets, according to the Wall Street Journal.
Partly as a result of the Chinese real-estate slowdown, prices for key industrial metals used in construction have softened.
Beijing has become one of the most expensive real-estate markets in the world relative to the income of its residents.
Calculations based on Soufun data show that in the opening months of 2006 an average-price new apartment in China's capital would cost about $100,000 — the equivalent of 32 years' disposable income for the average resident. By 2011, the average price had more than doubled to $250,000, but relatively modest increases in income mean it would now take 57 years to cover the cost.
