2013 Nobel Prize winner: China's real estate bubble is serious

English>>

Editor's Pick

2013 Nobel Prize winner: China's real estate bubble is serious

(People's Daily Online) 09:13, October 17, 2013

Email|Print|Comments

twitter

facebook

Sina Microblog

Robert Shiller, the winner of 2013 Nobel Prize in economics, believes that the real estate bubble is a serious problem in China.

The U.S. economist Robert Shiller, who has become one of the three winners of the 2013 Nobel Prize for economics, has visited China several times and has observed on several occasions that a housing bubble is inflating.

In 2009, Robert Shiller expressed his concern that behind the fast-developing Chinese economy there are several phenomena to which we need to be alert, such as high house prices in the southern city of Shenzhen in Guangdong province. He made the observation while visiting a Chinese company in Shenzhen.

He has calculated that in Shenzhen, Shanghai and other major cities of China people are buying houses at a price which is 8 to 10 times their annual income, which he considers to be unaffordable.

In 2009 he came to Shanghai to attend an executive MBA Forum held by the Shanghai Advanced Institute of Finance at Jiao Tong University, where he also aired his worries about Shanghai’s real estate prices.

According to Shiller, house prices were 100 times the income of ordinary people in Shanghai, meaning that these people would need to work for 100 years to buy an apartment. In this case, the reason why they still wanted to buy an apartment was their expectation that house prices would continue to rise. This gambling mentality was leading them into completely irrational buying decisions.

At the 2011 Davos Forum Shiller talked again about China’s housing bubble. With U.S. real estate prices falling, many people had lost their houses or been forced to leave their hometown to seek work. At the same time the U.S. debt ratio had reached the highest level ever. Shiller worried that the same thing would happen in China. Currently, Chinese households' debt ratios are also very high. Some experts now doubt whether the U.S. government can maintain its stimulus policy. If China’s real estate bubble bursts like America's has done it will badly affect the Chinese economy.

Edited and Translated by Yao Chun, People's Daily Online

Read the Chinese version: 诺贝尔经济学奖得主席勒：中国房地产泡沫严重
, source: Beijing News