- A circle – when markets go up in property, more people want to get in, as they assume the past will repeat itself, rather than thinking we are at the height of the market
- In HK, it is a huge misconception there isn’t enough land. There is. A lot of green spaces, but the governments gets most of his revenues from selling houses and land. All the land in HK belongs to the government apart from 1 church. So they make revenue from that, rather than income tax, which is low.
- Rising incomes were a big reason for price rises until 2007
- High savings rates, parental financing support – China’s 1990s’ housing privatisation enabled many urban residents to purchase their socialist housing units for prices under market value. Urban household wealth ballooned in the following decades as home prices rose, creating a generational pool of savings. Today’s parents and grandparents can leverage that wealth to help newly married children buy homes, pushing prices beyond what ordinary incomes could support.
- Limited investment vehicles – Low returns on bank deposits and immature stock and bond markets have made real estate China’s preferred store of wealth, leading to large investment allocation in housing.
- High population density and urbanization – High population density and inflow of migrant workers have put upward pressure on cities’ land values and home prices, as developers and home purchasers compete for scarce land resources.
- Strong income growth – High price levels today are more easily justified when one considers that average incomes in China are growing around 10 per cent per annum. Additionally, official income statistics may be underreported due to “grey income” outside the state’s supervision and control.