There's no housing bubble in China

That's what they say in the current issue of The Economist where everything appears to be free online now - they used to have those little dollar signs in those little red price tag thingies for stuff you had to pay for, but they are now noticeably absent.

Anyway, there are many things to learn in this article:

TEN years after the start of East Asia's financial crisis, some economists are fretting that the region is heading for another bust as abundant liquidity and low interest rates inflate bubbles in shares and housing. The bursting of property bubbles in 1997 played a big part in the region's economic and financial meltdown. Average house prices fell by 20-50% in real terms in most countries between 1997 and 2003. In Hong Kong, nominal prices slumped by as much as two-thirds.

China escaped relatively lightly in 1997-98. But today a collapse in house prices could have nasty consequences—more severe than a bursting of its stockmarket bubble. That is because 80% of China's urban households now own their home (in America, the national figure is 69%), compared with only around 10% owning shares. It is fortunate, therefore, that for all the talk about a housing bubble, by most measures it does not exist.

Average house prices have risen by 30% in China since 2002, less than the 46% jump in America. Admittedly, prices in Shanghai have almost doubled. At the peak of the boom in 2004, the prices of luxury apartments in Shanghai were rising at an annual rate of 50%, but the government has since successfully cooled the market with a capital-gains tax on homes resold within five years and an increase in minimum down payments. In a developed economy, double-digit annual price gains would indeed look bubbly, but not in an economy where nominal GDP is growing at a rate of 14%.

Across the globe, studies show that in the long term the main driver of house prices is income. The ratio of average house prices to average incomes is currently flashing red in America, Britain, Spain and quite a few other developed countries where it has soared to record highs—ie, above levels that preceded previous crashes.

Yeah, it's been flashing red for a while now.