Housing now consumes 25% of Chinese household budgets, compared to just 5% in 1990, reflecting massive urbanization and soaring real estate prices. This trend is having a significant impact on consumption and the country’s economic growth.
Historical Trends in Spending
In 1990, urban households spent approximately 5% of their disposable income on housing, benefiting from a market still dominated by low-cost public housing. This share climbed to 24% in 2021 for urban residents, reaching 25% recently due to soaring prices and debt. More than 90% of Chinese households own their homes, often multiple properties, which directs savings towards real estate (78% of household assets).
Factors Driving the Rise
Rapid urbanization (from 26% in 1990 to 65% in 2025) and the liberalization of the real estate market after 1998 have propelled prices: +300% in Beijing and Shanghai since 2000. Mortgages represent 60% of household debt (compared to 18.8% of GDP in 2007). Local governments, dependent on land sales, fueled this bubble until the 2021-2025 crisis.
Impacts on the Chinese Economy
This fiscal strain is curbing consumption: households affected by the fall in real estate prices (-20% since 2022) are reducing non-essential spending. The real estate sector, a pillar representing 25-30% of GDP, is stagnating, with new home sales at their lowest level in 15 years. Household debt at 60% of GDP amplifies systemic risks.
Recent government measures
Beijing is allocating 4 trillion yuan to “white” housing projects and lowering mortgage rates by 0.5% by 2025. The objectives are to renovate 1 million homes and subsidize access for young households, in a context of high birth rates. Despite 5% growth by 2025, housing remains a chronic obstacle.
The share of housing in Chinese household budgets significantly exceeds that of the United States and Europe, where it averages between 15% and 20%.
China: An Overwhelming Burden
In China, housing (primarily mortgage payments and expenses for 92% of homeowners) will absorb 25% of urban households’ disposable income by 2025, fueled by urbanization and real estate prices that have increased thirtyfold since 1990. This is hindering domestic consumption, unlike in the 1990s when public housing was inexpensive.
United States: Moderate but Variable
In the US, this share averages 15-18% of household budgets (rent or mortgages), peaking at 30% for the poorest 25%. The homeownership rate is lower (65%), and urban rents (e.g., New York) often represent 25-35% of the median wage, but tax breaks mitigate the impact.
Europe: Regional Disparities
In Europe (EU average 19.2% in 2024), the share reaches 37% for poor households; France is at 18-20%, Germany at 22%, while countries like Greece and Spain exceed 25% in high-demand areas. Unlike China, renting dominates (40% of households), with rent controls in several countries.
Long-term outlook
The share of housing could stabilize at 20-25% if prices stop rising, but the ongoing crisis risks prolonging household austerity. A shift towards domestic consumption is crucial for China’s post-2026 growth.
