What a difference five years makes!  When we first began to gather data on China, gross rental yields in all categories of Beijing condominiums were above 9%, and gross rental yields for villas in Beijing ranged from 9.5% to 13%.  In Shanghai, returns were less stellar, with gross rental yields on apartments ranging from 5.4% to 7%. 

Today, gross rental yields on almost all sizes of apartments in Beijing are below 3%, and  in Shanghai the situation is broadly the same. 

We find the official statistics in China confusing.  And as it happens, our own data-gathering in China has been rather inconsistent. We’ve relied on high-end expat-oriented sites some years, and on lower-end Chinese-language sites in other years.  

But it is hard to escape the fact that prices have been climbing steeply, while rents have not moved much. 

Yields below 3% are a danger signal.  We have been reluctant to join the chorus warning about a bubble in China in previous years, for the good reason that in 2008, apartments in most large cities in China has rental yields above 5%, a level which we generally consider ‘safe’. 

However we believe that yields of less than 3% indicate danger, in China as anywhere else.  We were the first to warn that a crash was likely in the Baltics, and then, our signal was that yields dropped below 3%.  We gave similar warnings in Dubai.  With the market-cooling steps taken by the authorities, we think investment in Chinese property would be very unwise at this stage.