Robert Shiller, this year’s recipient of the Economics Nobel Prize and a frequent visitor to China, has warned of a huge housing bubble currently brewing in China.

Shiller – who predicted the collapse of the US housing market – has expressed alarm at the rapid rise in global housing prices for years. In 2009 he attended an EMBA forum hosted by Shanghai Jiaotong University and during an interview expressed his concern towards Shanghai’s property prices. “Housing prices in Shanghai are basically a hundred times the annual income of an average person so why do people want to go ahead a buy a house anyway? The answer is they think that property prices will continue to rise. People are inclined to speculate and they believe their house value will definitely rise; but I think they are being irrational.” 

“This financial crisis that we've been going through in the last five years has been one that seems to reveal the failure to understand price movements," Shiller said. He has gone on to argue that prices in some markets have risen too far and that this seems to be what’s currently happening in China. If this problem is not addressed, China may face damage to its overall economy similar to the US.

Source: ifeng.com

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Keywords: Robert Shiller China warning housing bubble in China