Chinese Still Prefer Property Over Stocks

Matthew Zhou and his wife spent 1.6 million yuan ($261,000) to buy a two-bedroom apartment in eastern Shanghai in August because they saw no potential to make money in China’s financial markets. “Home prices keep rising, so I’d rather buy a place now than put the money in the stock market,” says Zhou, 30, an information technology engineer at a state-controlled bank in Shanghai. Gains in equities “could never outpace the growth of home prices,” he says.

The preference of people such as Zhou for property over other investments is one reason residential prices have defied a long-running government campaign to put the brakes on the housing market to keep homes affordable. New home prices in major cities, including Beijing and Shanghai, rose more than 10 percent in July from the year before, compared with a more than 10 percent drop in the benchmark Shanghai Composite Index during that period. Even after a recent rally, the Chinese stock market is down 32 percent since the end of 2009. Saving rates on bank deposits are set at 3 percent.