Protesters occupy developer's office in Shanghai after home values plummet
The Great Wall is not the only thing that's collapsing in China. Shanghai homeowners struck by losses in property value have launched into protest:
Hundreds of angry home buyers launched a series of protests in China's commercial hub of Shanghai this week, as owners decried falling prices for their properties, state media said Thursday.
Hit by weak demand and lack of funding, developers have slashed prices for some new projects in the city by more than 20 percent, the China Business News said, causing an outcry among those who bought at higher levels.
Analysts said the sometimes violent protests signalled that government measures designed to cool the red-hot property market were working and they warned developers in other parts of the country were starting to cut prices.
64 million homes sit vacant across China
The world's biggest real estate bubble is beginning to burst. Suburban areas have seen prices fall as much as 50%:
Though data from the National Bureau of Statistics show the month-on-month price remained unchanged in Beijing, Shanghai, Shenzhen and Guangzhou from July to September, home prices fell from 30 percent to 50 percent in the suburban areas of these cities.
Chen Li, head of China Equity Strategy at UBS securities Co Ltd, said fluctuations in the property market may pose the biggest challenge to China's economy next year.
"The decline in home prices, I believe, is just beginning. And this price adjustment will cut deeper than was the case in 2008 to 2009," Chen said.
The higher-than-expected price decline has triggered strong protests from earlier buyers.
Despite the overall growth of wealth in China income inequality has soared, reaching a level almost as high as the United States:
[T]he accumulation of fortune will be achieved along with an expanding wealth gap in China where the Gini coefficient, a commonly used measure of inequality of wealth, has already passed an extremely dangerous level. […]
The Gini coefficient in China reached 0.5 last year after hitting the recognized warning level of 0.4 more than 10 years ago, according to a report by Xinhua news agency in May last year. Developed European nations and Canada tend to have Gini indices between 0.24 and 0.36.
A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality.
With an average monthly salary of just a few hundred dollars, Chinese workers cannot afford property prices that match those in the developed world:
China’s lofty property prices are far beyond the reach of many citizens, and have prompted widespread talk of an unsustainable bubble.
At Beijing’s 800-unit Tun San Li project, which started sales in 2009 and is set to open next June, a small one-bedroom apartment runs about $400,000, and larger dwellings cost more than double that.
In comparison, a typical Chinese middle manager, teacher or government official usually earns less than $1,000 a month.
The situation has been described as the 2007 bubble in developed markets “times 1000”. The problem is quickly cascading through the Chinese financial sector. The rise in non-performing loans held by banks could reach up to 100% of their equity: