## China's Housing Market: Defying the Odds?

_IMF Blog, February 1, 2016_

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**Canonical URL:** [China's Housing Market: Defying the Odds?](https://www.imf.org/en/blogs/articles/2016/02/01/chinas-housing-market-defying-the-odds)

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## Bibliographic details
- Authors: iMFdirect
- Published: February 1, 2016

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### Context
- Publication: iMFdirect
- Date: February 1, 2016
- Theme: Concerns about the stability of housing markets given historical precedents and potential systemic financial-sector spillovers.

### Comparative historical examples
- Japan: house prices rose by about 40 percent during the mid-1980s; the collapse was followed by a ‘lost decade’ in which incomes did not grow and house prices fell by over 40 percent.
- United States: house prices increased by about 30 percent between 2001 and 2006; their collapse was followed by the global financial crisis of 2008-2009.

### Key findings from the Shenzhen conference (organized by the IMF in cooperation with the Chinese University of Hong Kong, Shenzhen, and Princeton University)
- Aggregate trend:
  - House prices in China have continued their long upward march over the past decade (Chart 1), despite some reversals.
- City-level heterogeneity:
  - The steady increase in China’s house prices at the national level masks tremendous variation at the city level.
  - There is substantial heterogeneity across cities in the balance between housing supply and demand.
  - At one end, housing supply has outpaced demand in the interior part of the country.
  - At the other end, housing demand has outpaced supply in most major eastern markets, such as Beijing, Hangzhou, Shanghai, and Shenzhen.
- Valuation risk:
  - Markets such as Beijing, despite their strong measured fundamentals, should be considered somewhat risky because homes there trade at very high multiples of rent.

### Implications and risks
- History shows that housing collapses can be very costly and can lead to broader financial-sector collapse and high government cleanup costs.
- The identified heterogeneity implies differentiated risks across cities rather than uniform national exposure.
- High price-to-rent multiples in major eastern markets signal elevated valuation risk even where fundamentals appear strong.

*Source: iMFdirect, February 1, 2016.*

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## References

- [conference](http://www.imf.org/external/np/seminars/eng/2015/HousingChina/index.htm)
- [Global Housing Watch](http://www.imf.org/external/research/housing/index.htm)
- [here](http://www.imf.org/external/pubs/ft/survey/so/2016/RES012916A.htm)

_Source: https://www.imf.org/en/blogs/articles/2016/02/01/chinas-housing-market-defying-the-odds_