Current real estate deliveries were financed in the 2020-22 low-rate era, causing a temporary supply glut in high-demand sectors like Sunbelt apartments. Since new construction halted in 2023, today's depressed prices offer a unique entry point before supply normalizes and rents can accelerate.

A 1994 reform shifted tax revenues to China's central government while leaving spending obligations at the local level. This created a structural deficit for municipalities, forcing them to rely on off-balance-sheet land lease auctions as their primary source of funding, which in turn fueled the property bubble.

The most effective way to lower housing prices is to increase supply. Instead of artificially freezing rents, which discourages investment, policymakers should remove regulations that make building new units difficult. More construction creates more competition, which naturally drives down prices for everyone.

The policy restricted developer borrowing to curb speculation but failed to address the core drivers: households' need for a savings vehicle and local governments' dependency on land sales for revenue. By attacking the intermediary, the policy caused a crisis without solving the fundamental problem.

The hukou system links social welfare benefits to one's hometown, not their place of work. Migrant workers in cities are thus excluded from local safety nets, compelling them to invest heavily in real estate as a private substitute for state-provided welfare, healthcare, and retirement security.

High home prices should not be interpreted as a sign of a healthy market. Instead, they indicate a system that is malfunctioning as designed, where artificial scarcity created by policy and corporate buying drives prices up. This reflects a structural failure, not robust economic demand.

A major driver of today's housing scarcity is that homeowners, particularly Boomers, who refinanced into sub-3% mortgages have no financial incentive to ever sell. This seemingly positive economic condition has had the negative side effect of locking vast amounts of housing inventory in place, worsening the supply crisis.

While local policies like zoning are often blamed for housing crises, the problem's prevalence across vastly different economies and regulatory environments suggests it's a global phenomenon. This points to systemic drivers beyond local supply constraints, such as global capital flows into real estate.

The immense profitability of real estate in China created a gravitational pull for capital and talent. Productive companies diverted resources to start real estate side-businesses, and entrepreneurs abandoned other sectors, resulting in a net drag on national productivity and innovation.