Chen Zhiwu, professor of finance at Yale University said at the Investor Protection Forum that 79% of Chinese families' assets have been invested in real estate. If house prices fall, then a large number of Chinese families, especially those in first-tier cities, will be seriously affected.
Chen offered the example of the U.S. household property situation, which changed enormously from 2007 to 2010 under the impact of the financial crisis. The average wealth of a middle-income household shrank by nearly 40%, while the richest families' wealth grew by 2%.
"The cause of the difference lies in the different investment structures," Chen said. "Before the financial crisis, most middle-income American families had the majority of their investment in real estate. After the financial crisis house prices fell sharply, which caused a drastic shrinkage in their wealth. In contrast, financial investments such as stocks, bonds, hedge funds and precious metals accounted for a large proportion of the portfolio of the richest American families. After the financial crisis financial asset prices rose, so the richest families were less affected by the crisis.
Finally, Chen suggested Chinese families to should be careful to adjust their investment structure and diversify their investments.
This article is edited and translated from 中国家庭资产79%在房产 房价下跌将致财富缩水，Source: Chinanews.com