How Expensive is Housing in China?
By Roger Weber
Imagine working your entire adult life, each month stashing away half your income to save up for a new house, and by the time you retire only having saved up a third of what you need in order to actually buy one. The burden would be passed to your children, who would spend their entire lives doing the same, and then their children. Half a century after your death, the cumulative fruits of the efforts of three generations of your family would be realized: the right to buy a 500-square foot apartment two hours outside of a major city, without a refrigerator.
Today, millions of Chinese citizens are braving a nearly insurmountable mountain as the pine for a new urban life for their families that will portend opportunities for improvement in their fortunes. Theirs is the inspirational story of the lengths people will go to chase the dream of a better life for their children and their grandchildren. When the alternative is eternal poverty, humans have a remarkable tendency to band together to overcome collective obstacles. Their dedication to the pursuit of urban housing is a shining example of the triumph of the human spirit.
But that their struggle exists in the first place also showcases a glaring challenge in China’s quest to grow diversified urban economies that will afford them the broad-based societal prosperity that is already commonplace in the United States. While China has a larger population, compared to the U.S., China is still more rural, its average citizen poorer, with wealth and opportunity more stratified, the country still in the throes of the process of urbanization that drove America’s industrializing economy over a century ago. As rural migrants seek the opportunities of the city, looking to leverage them to grow wealth for their families, the cost of housing is a severe impediment slowing the process. The cost to buy an urban residence in China is unimaginable to those living in the United States, and as such the process of realizing the “Chinese Dream” looks little like the experience of the generations who sought opportunity in America, where the prospect of acquiring an affordable home and opening a business were the stepping stones on their way to realizing the American equivalent.
How much does housing cost in China?
China’s housing prices are constantly evolving, but, as of 2021, the average new urban dwelling unit in China costs 29.8 times the average income in the country. For comparison’s sake, the average new urban dwelling unit In the United States costs 4.3 times the average income in the United States. In other words, housing in China averages around seven times more expensive as in the United States.
But this doesn’t even tell the full story. For one, housing in China’s urban areas is particularly expensive relative to living in the big cities of the United States.
It is nine times as expensive to live in China’s capital, Beijing, as compared to the US capital of Washington, DC.
It is around 19 times as expensive to live in Beijing as to live in Houston or Dallas.
It is around four times as expensive to live in China’s financial capital of Shanghai as to live in the US financial capital of New York City.
And the most affordable Chinese city studied, Chengdu, is still over twice as expensive to live in as New York City, the US’ most expensive city. Living in Chengdu is also around 5 to 15 times as expensive as living in a typical American City like St. Louis or Indianapolis.
Furthermore, because US housing is also larger on average, we can calculate that per square foot of dwelling space, Chinese housing averages 30 to 50 times as expensive as housing in the United States.
Why does housing cost so much in China?
There are several reasons:
Following decades of population boom, China is urbanizing rapidly as a component of its economic development, with millions of people surging form the countryside into China’s cities at a rapid clip. This has created a massively competitive marketplace for urban housing.
Unlike the US, which sprawled organically westward across the North American countryside over generations across nearly 19,000 towns and cities with nearly unlimited capacity for new housing, China’s urbanization is occurring across fewer places. 94% of China lives in the metropolitan areas of the country’s eastern coast, with a huge plurality sprawled within the urban megaplexes of Beijing, Shanghai, and the Pearl River Delta.
With few investment opportunities and little trust in the stock market, China’s urban migrants are competing not only with each other for housing, but with speculative investors who see opportunity to profit from the rapidly rising cost of housing in the country. Millions of housing units, consequently, are owned but not occupied. This has created artificially high demand, and a self-perpetuating runaway balloon in the housing prices.
Seeing opportunity themselves, Chinese property developers are selling housing to people before even building it, at higher and higher prices, as a means to pump cash into their pockets to fund the housing they’re behind on building elsewhere.
Is China’s housing the most expensive in the world?
Yes, housing in China is the most expensive in the world by a wide margin. In a study of average housing affordability that looked at 480 cities worldwide, including 131 US cities and seven Chinese cities, all seven Chinese cities studied appear in the top 60 most expensive cities and five fall within the top 16. Relative to their average incomes, Shenzhen, Beijing, and Shanghai are the top three most expensive cities in which to buy housing in the world.
By contrast, only one US city appears in the top 100 most expensive cities globally, and only four appear in the top 200. 60 of the 62 most affordable large cities worldwide are in the United States.
Why is housing so much more affordable in the United States?
The comparative affordability of America’s housing relative to that in China is a global miracle. While US cities are not growing as fast as China’s, the number, scale and multi-polarity of American cities has been a big factor in mitigating against the kinds of increases in costs that are seen internationally in rapidly growing cities. Miraculously, the fastest growing cities in the United States have seen substantially less growth in housing prices than slower-growing cities, an economic paradox largely attributable to differences in the way faster growing cities are organized. In the US’ fastest-growing cities, jobs are distributed more widely across the region than in traditional cities organized more around a central downtown. Multi-polarity reduces pressure on the center of the city to accommodate new housing demand. While demand for housing is higher in these cities overall, the fact that most new housing is being built in the expansively larger area at the periphery of these cities, helps overcome the pressures of high demand. In short, it’s not so much how much you’re growing, but how much you have the capacity to accommodate that growth, and if organize your city prudently, you can accommodate a lot of new housing without prices rising too high. US cities have done this more effectively than cities anywhere else in the world.
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