In Line Behind a Billion People: How Scarcity will Define China’s Ascent in the Next Decade

6. Housing: Home is where the wallet is

Few things in China are as affected by the convergence of demographic, economic, and political pressures as is its housing market. Rapid urbanization and income growth have made tens of millions of Chinese households into potential homeowners. That has taken place alongside the repression of the financial sector, redirecting savings from financial assets to real estate and inflating property prices in the process. And local governments that still rely on land-use fees from real estate developers to fund urban development have every incentive to support astronomical prices by keeping supply scarce.

The threat of a collapsing real estate bubble may preoccupy foreign observers and investors, but for the average ...