Opinion

    Keeping the lid on housing prices

    (China Daily Africa)
    Updated: 2014-01-10 10:18

    Keeping the lid on housing prices

    Shiller's theories highlight the risks of asset bubbles in China and the need to take corrective action

    Nobel laureate and Yale University professor Robert Shiller was one of the first global economists to talk about the runaway risks in China's spiraling property prices, a matter that has been of considerable interest in China recently.

    Shiller, well known for his insights on global asset prices and extended research work on behavioral finance, macroeconomics and real estate, had during a visit to China mentioned that property prices were moving at a "dangerously high" pace. That comment, highly controversial back then, seems even more controversial now, given that real estate prices across most of China have increased by more than 50 percent, and by more than 100 percent in a few high-profile markets.

    It is also worth noting that Shiller has not always been spot on with his predictions, especially those on the US real estate market. In 2005, Shiller faced considerable skepticism when he predicted that the real estate bubble would burst in the US. The US real estate market started showing bubble signs two years later, and this was followed by five years of continuous price decline.

    However, the problem with the Chinese real estate market is far more complex.

    In the last three decades, China has emerged as one of the greatest economies in the world and its citizens are enjoying a lifestyle comparable to those in countries with far higher incomes. At the same time, the desire to lead comfortable lives has prompted Chinese people to also highly value the quality of their residence.

    Furthermore, since urbanization is an important driver for the next stage of economic growth, it is natural that more people will migrate to the bigger cities, which further boosts investors' confidence in real estate as an asset class.

    On the other hand, Shiller's research on real estate can offer at least the following perspectives on the Chinese real estate market.

    Based on his work and some other research carried out in the Netherlands, there is little evidence that real estate as an asset class can outperform a country's long-term inflation. In this sense, real estate may not be as attractive as equities in terms of investment returns.

    Keeping the lid on housing prices

    At the same time, the research also shows that the current methodology used by China to calculate the appreciation level of the real estate market is flawed, as it does not account for the fact that the sample size for real estate transactions has changed over time. This is a particularly serious problem for the Chinese real estate market because of the hastened pace of real estate development in urban expansion. Based on some of the author's calculations, such a bias may result in an understatement of housing market appreciation by more than 100 percent.

    Further, like many other asset classes, such as equities and fixed income securities, the value of real estate is primarily determined by its fundamental value, in this sense, the rent generated from leasing. Based on such criteria, rental yields from Chinese real estate are appallingly low, when compared to international average, and also meager compared to Chinese data from five years ago.

    Put differently, although housing prices have increased substantially over the past five years, rents, or the dividends from owning real estate as investment assets, have not increased in tandem. One of Shiller's major research contributions is that, based on his research into the real estate and equities market in the US, he shows convincingly that there cannot be too much deviation between asset prices and the fundamental value. If that does happen, then bubbles could form, Shiller has said.

    Shiller, however, admits that bubbles do not necessarily pop immediately after they are sighted and it is difficult to predict when they would do so. As a matter of fact, the formation and escalation of bubbles may indeed reinforce people's belief in assets that are already in bubble price range. This is especially the case for real estate, given that there are limited ways for investors with bearish views to "short sell" in the real estate market.

    However, Shiller points out that, as long as the price greatly exceeds the fundamental value of an asset, it is just a matter of time until the bubble bursts. By that time, the longer the bubble lasts, the longer it may take the economy to recover from the burst.

    The author is a faculty fellow at the International Center for Finance, Yale University; and deputy director of the Shanghai Advanced Institute of Finance, Shanghai Jiaotong University. The views do not necessarily reflect those of China Daily.

    (China Daily Africa Weekly 01/10/2014 page10)

    8.03K
    ...
    日韩视频中文字幕精品偷拍| 国产白丝无码免费视频| 精品无码三级在线观看视频| 欧美日韩中文字幕在线看| 人禽无码视频在线观看| 久久精品一区二区三区中文字幕 | 无码av免费一区二区三区试看| 亚洲精品一级无码中文字幕| 亚洲av中文无码| 精品国产一区二区三区无码| 精品久久亚洲中文无码| 最近最新中文字幕完整版| 久久精品人妻中文系列| 国产精品无码免费专区午夜| 色噜噜综合亚洲av中文无码| 无码av人妻一区二区三区四区| 91在线中文字幕| 乱人伦中文视频在线| 日韩经典精品无码一区| 精品无码国产一区二区三区AV| 中文一国产一无码一日韩| 亚洲国产中文v高清在线观看| 日韩久久久久久中文人妻 | 日韩亚洲国产中文字幕欧美| A级毛片无码久久精品免费| 人妻精品久久无码专区精东影业| 亚洲熟妇无码乱子AV电影| 久久亚洲AV无码精品色午夜| 亚洲美日韩Av中文字幕无码久久久妻妇 | 久久受www免费人成_看片中文| 乱人伦人妻中文字幕无码| 成在线人AV免费无码高潮喷水| 久久久久亚洲av无码专区喷水| 蜜桃臀无码内射一区二区三区| 少妇人妻偷人精品无码视频新浪| 亚洲∧v久久久无码精品 | 人妻无码视频一区二区三区| 色综合久久中文字幕无码| 日韩精品人妻系列无码专区免费| 亚洲AV无码一区二区乱子伦| 手机永久无码国产AV毛片|