Housing crisis in Shanghai needs to be addressed

An emerging issue for the local Chinese people is the housing crisis in Shanghai. Many people can afford to sustain a home in the city often leaving people under water in a pile of debt they are unable to crawl out from. Though the price increases have slowed recently, housing costs for local Chinese people has become difficult because of the expensive prices of an average home.

Based on recent growth charts, Chinese investors have been warned about the Chinese housing market and how the prices have been out of control. For the past decade of constant rise in price level, a house with an average 1,000 square foot apartment in Shanghai is going for $725,000, or around five million yuan. Shanghai’s average salary per month is 7,108 yuan or 85,300 yuan a year.  As a result, that puts local property in Shanghai at about 50 times median salaries in the city. Local property owners are stuck in a conundrum of debt with their low paying salaries and high costing living.

The same can be said about New York, the most expensive city in the United States, where the “median income is around $52,000 a year and an average 1,000 square foot apartment will cost $1.7 million based on square foot prices of $1,756.” This reflects the similar housing situation in Shanghai where the average salary cannot handle the average living costs in the city. However in New York, there is money inflowing investing into real estate at a higher rate than in Shanghai especially from the international market. In Shanghai, the money that is invested in housing is from domestic parties for a majority. As a result, the housing market can be marked up for a much higher rate if rich Chinese real estate investors overpay for their homes which can drive the market into a higher than affordable living cost. Furthermore, large landowners are able to charge and raise the price to whatever the price because the money is largely domestic.

The standard of living needs to be addressed in Shanghai. According to the numbers, “locals would need more than double their monthly income, or at least $3,300, to maintain the same standard of living as a New Yorker earning $7,300 a month.”  This unsustainable living condition in the city will create a wealth gap that cannot be closed if changes are not made.

Featured Image- A landscape of Shanghai. Credits- Shutterstock

by Patrick Du