This paper aims to quantify the contribution of demographics and monetary factors to the overall Chinese housing boom in the 20 years between 1999 and 2018 and to predict the Total Residential Sales in the following three years from 2019 to 2021.

The study indicates that population and urbanization factors did contribute to the growth of the Chinese housing market to a certain degree. However, they are not the main drivers behind the housing market growth in most of the markets examined in this paper. On the other hand, monetary factors, such as Reserve Ratio and Mortgage Loan, and fiscal factors, such as Fiscal Expenditure and structural reform, contributed remarkably to the growth over the 20 years. With the tapering of credit easing and fiscal expenditure under a slower GDP growth target in China, our FGLS model predicts that in the base case the total Chinese residential sales would reduce from RMB 12.6 trillion (USD 1.8 trillion) in 2018 to RMB 10.8 trillion (USD 1.5 trillion) in 2021, growth unsustainable in three years.

Although Mortgage LTV and Mortgage to GDP ratio in China are at moderate levels, households are not necessarily able to borrow further for property investment because their Mortgage Debt Servicing Ratio has reached alarming levels, especially in large cities. Without any structural changes in household income, it is increasingly difficult for Chinese households to expand their already sizeable property investment portfolios.

Overall, the statistics study shows that the key driving factors behind China's housing market growth in the past cannot sustain the same level of growth as 2018 for the following three years. However, regression models may not adequately capture the effectiveness of housing policies and fiscal reform measures. When studying the Chinese housing market, we should not lose sight of the government’s role in maintaining short term stability and generating long term sustainability. Successful implementation of fiscal and monetary stimulus policies with long term prospects by the government would help to preserve the stability in China’s housing market and provide cushions for the potential structural slowdown in housing demand.