CHINA'S HOUSING AFFORDABILITY : MYTH OR REALITY? - A STUDY OF CHINA'S AFFORDABILITY SITUATION AFTER 1998

Abstract

The 1998 legislation forced urban Chinese, who traditionally benefited from the welfare housing system, to look into the housing market for residential needs. Since then, residential prices in many Chinese cities embarked on an upward climb. The high growth rates in housing prices led to speculation that housing affordability in China has become a 'myth' for the average urban households. A time-series of Housing Price-to-income Ratios (PIRs) from 1998 to 2004 of 20 Chinese cities have been computed and results indicate that PIRs for economically less developed, second-tier cities are lower than the first-tier cities. This proves that while affordability may be an issue in larger cities like Beijing and Shanghai, housing costs is not a burden for the middle income households in the second tier cities.