Renters become new home owners

China's property market has developed in just a few decades from the system where people did not own their homes but lived in properties provided by the state institution, the so-called work unit, that employed them. Rents were tiny and workers typically remained in their flats after retirement. The reforms began in the 1980s when foreigners were allowed to lease land in special economic development zones.

This represented the first decoupling of the use of land and its ownership since the communists had declared decades before that all land belonged to the state. For private residential property, the 1990s were the key period for change. A scheme was introduced that allowed people to accumulate savings against which they could borrow to purchase property, with employers matching the amounts individuals saved.

From the late 1990s, state housing was no longer provided at extremely low prices and rents increased significantly. Many work-unit properties were sold and new properties were not provided to state employees, but instead sold to individuals. Prices increased dramatically. As well, many traditional houses have been demolished in China's cities and replaced with towers, with local authorities pocketing vast amounts of money for land sales.

There have been complaints about the demolitions and allegations of strong-arm tactics to evict people from their homes, although some residents have been happy to take compensation and move into modern apartment blocks. In Shanghai, the average living space doubled in the 15 years from 1990. [e-mail]