Housing prices in China have been a hot topic and a topic of controversy. Some believe that China's housing prices have formed a bubble that could collapse at any time, just as Japan did.
Some argue that China's housing prices still have room to rise because China's economic growth and urbanization continue.
So, will China's housing prices fall by about 70% as Japan did that year?
First, the Japanese house price crash occurred in the late 1980s and early 1990s, mainly due to factors such as overheated economy, too tight currency, weak financial regulation, and bursting asset bubbles. During this period, Japanese housing prices soared to outrageous levels, for example, in 1989, the average residential price in the central area of Tokyo was as high as 150 million yen (about 9 million yuan).
However, with the recession and changes in the international situation, Japan's asset bubble began to burst, and house prices entered a channel of continuous decline. Beginning in 1991, Japanese house prices fell for 15 years before bottoming out in 2006. In the 15-year period, the average residential price in Japan fell by 67%, and in the central Tokyo area by 75%.
Second, China's housing price rise began in 1998, mainly driven by economic growth, urbanization, monetary easing, financial innovation and other factors. During this period, China's housing prices have gradually risen to a high level, for example, in 2019, the average residential price in Beijing reached 64,000 yuan per square meter (about 6.4 million yuan).
However, unlike Japan, China's economy has not experienced problems of overheating and stagnation, but has maintained a high growth rate. At the same time, China's urbanization level still has a lot of room to improve, rather than being close to saturation like Japan. Moreover, China's monetary policy is relatively prudent and flexible, rather than being too tight or too accommodative like Japan. Finally, China's financial supervision is relatively sound and effective, rather than having major flaws and loopholes like Japan.
To sum up, there are many differences before and after the collapse of house prices in China and Japan, and these differences determine the difference in house price trends in the two countries. Therefore, we cannot simply apply the experience and lessons of Japan's housing price crash to China's housing prices, nor can we blindly predict that China's housing prices will fall by about 70% as Japan did in the past. On the contrary, we should analyze and judge the trend and risk of China's housing prices from multiple angles and levels.