A crucial industryAs the price of housing grew rapidly in almost all parts of China in the past two decades, many believe that a sizeable price bubble is formed in the country’s real estate market. The growth of the sector is, however, backed by several developments since the 1980s. China’s constant advancement in urbanization and the rapid rise in its economy and GDP led to sustainable demands for new housing in urban areas. The growth also benefited all social classes, making acquiring property possible, even for many citizens with lower incomes.
For most people living in China, housing is not seen as a commodity, but as an ever-appreciating asset for investment. People commit a considerable part of their savings and take out mortgages with high-interest rates for property purchases. For the government, the real estate market is equally important, as housing is not only a vital part of the national economy, but also an essential source of government income. Many local governments’ budgets are profoundly dependent on the revenue generated by land transfers, as they lack other financial means. A considerable part of bank loans in China is also property-related, with the total value of residential property mortgages in the country surpassing 40 trillion yuan in 2021. Consequently, a fall in the real estate market can potentially trigger a widespread debt crisis. For these reasons, the development of the real estate sector is crucial for China’s economic stability and the Chinese authorities are making considerable efforts to control and stabilize the market.