Will China’s Housing Slump Ever End?

0:00 – 3:43

The Urbanization Tsunami That Built a Bubble

Picture this: every six months, China has to create a new urban area the size of London. That's the scale of migration happening since Deng Xiaoping's economic reforms in the late 1970s triggered the fastest urbanization in human history. The percentage of Chinese people living in cities rocketed from 20% in 1980 to nearly 70% today, with roughly 20 million people moving every single year. This avalanche of urban migration created insatiable housing demand. Developers built frantically, but supply could never catch up. The median house price quintupled between 1980 and 2005, with even steeper climbs in major cities. Everyone assumed prices would rise forever. So developers borrowed astronomical sums to build more, and buyers took out bigger mortgages to climb aboard. Property swelled to 75% of all Chinese household wealth (compared to 35% in the UK) and fueled 20 to 30% of all economic activity. By the 2010s, the bubble had become grotesque. Property prices in large Chinese cities hit 40 times the median salary, the highest ratio in the world. With population growth slowing and urbanization tapering off, the CCP saw the writing on the wall. In August 2020, they introduced the "three red lines" policy, capping how much debt developers could carry. Overleveraged giants like Evergrande suddenly had to pay down debt, confidence cracked, and house prices started falling. Media attention spiked, then faded when the predicted collapse never materialized. But the crisis didn't end. It just went quiet.