This data is produced by the NBS and published on a monthly basis. In recent years the data has come under a great deal of criticism as it generally generates figures that are consistently lower than independent surveys conducted by private companies, such as the China Real Estate Index System or CREIS —a fairly comprehensive dataset compiled by Soufun.
The NBS data is compiled for 70 cities, for new residential property, new commercial residential property and for secondhand property.
The price of houses and real estate in general in China is of great importance both at home and abroad for a number of reasons. It is important at home mainly because since the financial crisis, real estate investment has become the single largest driver of growth in China (accounting for 10 percent of total GDP) and because rising house prices and real estate are increasingly becoming a point of contention among the laobaixing – or ‘ordinary people’ – that increasingly see the dream owning property quietly slipping beyond their grasp. It is of additional importance because it is widely speculated that real estate prices may represent a dangerously over inflated ‘bubble’ that, if it burst, could present significant problems for both China and the rest of the global economy.
Rapidly rising house prices in China’s more developed cities has been driven by rampant speculation caused a lack of alternate investment opportunities and has driven huge levels of speculative investment leading to the construction of ‘ghost towns’ in secondary cities, such as Ordos in Inner Mongolia. Local governments have benefited from green-lighting such projects because they provide a quick return in terms of GDP growth in the short term.
In general, prices in more developed cities have been rising faster than income gains can keep pace. At present, the average price of real estate in Beijing is roughly 30 times the average income of its citizens. And as average wage statistics tend to overinflate average wages the true figure is much higher than this. This figure is shockingly high when compared with more developed markets like London where the same ratio recently reached a record high of 7.5 times.
Bursting of the real estate bubble could lead to chain reaction of defaults on debt, much of which was financed through the risky shadow banking sector, a sustained period of deflation further exacerbating the global trade imbalances, or political unrest as home owners see the value of their investments plummet.