China added many real estate firms in the 21st century, up to 60,000 by 2005, with the largest owning assets worth over $4.7 billion and paying $157 million in yearly taxes. Seventy of China's one hundred richest people were property developers. Some of the larger estate agents were authorized by banks to approve mortgages themselves, speeding up purchases.
In some cities, people waited in line overnight, like Americans do for special sales and concerts, just to buy an apartment in a new development from the developer, even before any building had started. Many carried bags of thousands of dollars in cash to get in first with down payments and grab up the living quarters.
China underwent radical housing policy reforms after 1995. Prior to that, most city residents lived in housing assigned to them by their "work unit" or their state-run employer group. Beginning in 1949, old housing was divided for more people and new housing blocks were built. Tenants paid token rent and stayed there for life, even after retirement.
The government saw this as an economic burden against profitability and prohibitive for their businesses to be competitive internationally. So housing accumulation funds were established for workers to set aside a salary percentage which the work unit matched. The funds were available for loans for home purchases or renovations.
On July 1, 1998, the state announced the low-rent housing would end and rents would increase a lot. New homes would be available only to buyers. About 250,000 people in Shanghai bought homes by 2000, using the accumulation funds, and housing prices soared by several hundred percent in big cities. Between 1998 and 2005, the total value of mortgages increased 35-fold. Interest rates rose as well and about one-third of mortgage-holders were spending over half their income on their mortgages.
Many new home developments were built but they are quite a drive from underground stations followed by another 30 to 40 minute ride into the cities where the people work. There are high management fees and roads are not in good shape. But home ownership is now a status symbol and women will not marry men who do not own one.
The government was happy because the housing industry had been stimulated as well as other economy sectors such as big home improvement stores where homeowners learn to finish their house shells themselves. In 2003 IKEA came and had 65,000 visitors the day it opened in Shanghai, up to 15 million shoppers in 2012, becoming the largest foreign commercial landowner in China. Young people are shunning family antiques in favor of the modern look, even to the point of throwing antique furniture away. A new business developed of buying up these heirlooms and selling them for high prices in the United States and Europe.
Chinese television and advertising promoted the new residential compounds' international lifestyle for the Californian, British and Spanish architectural styles or the French chateau and the more well-to-do want to show off their money by building a different housing style. It is still eating up farmland, adding dust to the air pollution problem from tens of thousands of construction sites, and causing traffic jams as passenger car sales quadrupled from 2001 to 2006 to 5 million a year. Electric consumption in Shanghai grew 15 percent each year in the first few years of the century.
There was a lot of anger and protesting with Internet petitions from people who saw the housing market as collusion between local officials and powerful real estate companies, causing a market that benefits the wealthy but where the poor cannot survive. The government responded by jailing senior officials taking bribes for illegal land acquisition. One department announced over 60 percent of land sales in 2004-5 were unlawful. There were continual warnings about the huge amount of bad loans to developers and the potential bubble in many cities. Read the book China Getting Rich First-- a Modern Social History by Duncan Hewitt to learn more of the history.
Bad loans and real estate bubbles have a familiar ring to Americans. In China, prices rose too high and the housing market grew too fast. Total sales in 2012 for the top ten developers in China were US$128.3 billion, but net profits compared to 2011 were down 18.64 percent. Read the list and statistics of the top ten real estate developers in China in 2013. An August 2013 report from a government national audit released the information that almost US$9.48 billion was embezzled from government-subsidized housing projects. Read the August 2013 CBS News article about China possibly having the largest real estate bubble in history with its ghost cities of towers, condos, apartments and subdivisions uninhabited.