What has happened?!

Chinese housing bubble has kept growing since year 2000. The overconfident developers, state-owned firms and individuals have been leveraging themselves to invest in this "forever growing money tree". According to UBS AG, property price growth rates in Shenzhen, Beijing and Shanghai are 120%, 64% and 40% in 2009, respectively. Huge profits gained from investing housing market enhanced their greedy and ignored the risk of bubble outburst, which creates a vicious cycle. 

See the comparison among houses prices around the world(picture below). The houses from the top to bottom are houses in , Indonesia ($107,000), Russia, Argentina ($149,000) and China($150,000), respectively. It blew my mind when I saw the 60m² house in Beijing's country side worth 150 thousand dollar.  I know this could be hyperbolic but it somehow indicates the serious housing bubble in China, especially in main cities!

In  2010, The price-income ratios in main cities of China were extremely high, especially for Shenzhen.  The disposable income of a family was $10,208 in 2008 while the average house price for a 90 m²  house was $254,833 (Society construction analysis report in 2010). It took a ordinary family 25 years disposable income to afford a house without eating and consuming!

                                                                                                                                                                      
Fortunately, some effective housing policies had come out last April. For example, banks cut loans for investing in housing market; Increasing the down-payment and mortgage interest rate; Non-natives have to pay taxes for at least one year before taking mortgages, etc. These policies were meant to cut the demand and supply for houses at the same time.  

The first week of May 2011, the average price of new houses in Beijing, Shanghai and Shenzhen dropped by 20%. The policies seemed working, said by Stephen Green.