The average ratio between housing price and income, an index indicating the degree to which housing is affordable by the local population, is now as high as 9.4 in Beijing, the capital,much higher than the average level of many metropolises in the world.

The present housing prices in Beijing, which have exceeded local residents' purchasing power, will not drop in a short term, said a report released by the Home Link Group (HLG), a noted real estate company in Beijing.

In 2005, the disposable income of each household in Beijing averaged at 51,194 yuan (6,480 U.S. dollars) and the median price of a second-hand dwelling unit was 480,000 yuan (60,760 U.S. dollars).

This means the House Price to Income Ratio in Beijing reached 9.4:1, The HLG explained.

The World Bank considers the ratio of 5 to 1 as affordable for local residents, while the United Nations set the standard at even lower, 3:1.

Figures show such ratio is 3:1 in the United States and 4:1 in Japan.

The HLG warned that this ratio in Hong Kong had been 11:1 before its real estate bubble burst in 1997.

In some other Chinese cities, the ratio may be even higher.

A survey conducted by the State Development and Reform Commission (SDRC) shows the average ratio between housing price and income is approaching 12:1 in Nanjing, capital of east China's Jiangsu Province, one of China's economic booming towns.

The ratio between housing prices and disposable incomes should reasonably range between 4:1 to 6:1 in developing nations, according to a research done by the World Bank.

An expert with the HLG, however, said this index alone cannot prove the bubble exists in Beijing's real estate industry.

Housing prices are influenced by a variety of factors, and an overall analysis of the demand-supply relation in the real estate market is crucial, the expert stressed.

According to the expert, though the housing prices in Beijing fluctuate at high levels, and even exceed the average residents' affordability, the visible or potential demand remains huge.

The growing demand is based on a variety of factors, like household relocations due to original building demolition in urban construction, a batch of migrant people to Beijing before the 2008 Olympics, and the property revaluation due to expected appreciation of RMB, said the expert.

In October, 2006, the prices of newly-built houses in 70 major Chinese cities rose an average 6.6 percent year on year, with Beijing chalking up a 10.7 percent hike, the highest of any Chinese city.

Source: Xinhua