Shenzhen tops Chinese cities in terms of home price risk, says think tank

Shenzhen has the highest home price risk among mainland Chinese cities, followed by Xiamen and Shanghai, according to the country’s top think tank.

The conclusion came from studying each city’s deviation from historical prices based on home price and rent levels versus household income, the Chinese Academy of Social Science (CASS) said in a report on Wednesday.

The study examined the home price to household income ratio in 35 Chinese cities, an index widely used around the world to gauge affordability, along with the home price to rent ratio, an index that is more location and time sensitive. The study then calculated the overall deviation from historical averages, with a higher deviation equivalent to a higher price risk.

The academy found that Shenzhen topped the overall risk rating, followed by Xiamen, Shanghai, Beijing and Nanjing. The study said that except for Guangzhou, all other first-tier city home price risk levels were “worrying” and that the risk in second-tier cities that have introduced recent purchasing curbs was “significant”.

The study also said current risks in these cities was even higher than that seen in 2010, a previous peak time that was followed by price drops.

The findings echo similar results from studies by private institutions, which have named Shenzhen, Xiamen and Hefei the Chinese cities with the biggest property bubbles.

Shenzhen’s new home prices surged 32.1 per cent year on year in October, according to the National Bureau of Statistics, though recent policy curbs have dampened the city’s transaction volume and prices fell 0.5 per cent month on month in October.