Why have the real estate prices in Shanghai increased?

by Alex
15. August 2015
Category:   renting in Shanghai

Chinese invest in housing

Shanghai, China. Why have the real estate prices become so enormous in so short period of time?

A lot of it is because Chinese people are the world’s best savers. They have saved about half of their money during their lifetime, while the world average is around 20 percent. Imagine putting half of your salary into an account, so you can afford to buy an apartment or a house. That would not happen in any other part of the world.

And statistics shows that people from the Western part of China (for instance Shanghai) are the best ones to save money.

1 billion Chinese people save around 50 % of their salary right now. The Chinese have in fact no good options for their savings. The opportunities for investing money in mutual funds and other products tailored to consumers and individuals are virtually nonexistent.

Shanghai bune, pearl tower view

A view of the Shanghai Pearl tower from the bund

“One house” policy

This has led to huge price increasement in the Shanghai real estate market. And authorities do worry about this development. In order to curb inflationary pressures, the authorities have said that they will build 36 million homes at favorable prices by 2020. In addition, they have for several years tried to curb inflation by financial regulations. They have increased the requirements of equity, those who buy residential number two must set a 60 per cent equity, and banks are prohibited from grant loans to those who buy their third residence.

The latest rules is a “one house” policy, which states that single adults who live permanently in Beijing or Shanghai and who has not bought a house before will have the right to buy one apartment. In addition, a gain tax on the sale of housing 20 percent restrict speculative property investments.