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Housing in Beijing less affordable than world standards

Housing in Beijing is much less affordable than international standards, with an ever-widening gap between home prices and incomes, according to a survey.

Beijing-based real estate agency Home Link Group says the ratio between house prices and local incomes - a key indicator of affordability - is 9.4:1, compared to 3:1 in the United States and 4:1 in Japan. Before Hong Kong's real estate bubble burst in 1997, the city's ratio was 11:1.

Xinhua reported yesterday that the World Bank considered a ratio of 5:1 as affordable for local residents, while the UN had set its standard even lower, at 3:1.

Home Link came up with the ratio by combining Beijing Bureau of Statistics income data and its own calculations of the average price of 100,000 Beijing homes on the secondary market.

The group said the bureau put the average annual disposable income of Beijing families at 51,193.7 yuan last year, and the average cost of a second-hand home in the city in the same year was 480,000 yuan.

The company's business development director, Wang Zhiwei, who also helped draft the report, said the ratio for this year should be even higher because secondary market prices soared 16 per cent this year without a commensurate rise in income.

Mr Wang said the price of second-hand homes was close to that of new properties in the capital because the older homes generally had a better location. The report excluded high-end apartments and villas from its calculations because they do not target the general population.

He said the index alone did not prove there was a bubble in Beijing's real estate industry. The key to determining a property bubble was in the relationship between demand and supply, he said, and there was still a huge demand for housing in the city.

'Unlike Hong Kong before 1997, when speculators had good expectations about the real estate industry and bet on housing prices, Beijing's market is driven by people who want to buy homes to live in.'

He said the survey found 88 per cent of second-hand properties were bought for personal use.

The report said that even though housing prices were already high and exceeded average affordability, actual demand would ensure prices would not drop in the short term.

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