What's Fueling China's Real-Estate Fever?

As China's economy roars into another year, analysts are keeping a wary eye on the country's land and housing prices. Beijing's National Bureau of Statistics reported a 7.7 percent rise in those prices over the past year, and many experts believe that the actual increase was far more steep than that. Property investment and construction both shot up by roughly one third during 2010 despite government efforts to restrict mortgage lending and cool the market. At the same time, home prices remain unaffordable for most Chinese. The combination has prompted a tense bubble watch.

Nevertheless, a powerful Chinese cultural component could keep the real-estate market flourishing, no matter how overheated it may seem. Home-ownership has traditionally been a particular mark of status in China, and the growing middle class is maintaining that tradition with a vengeance. A recent opinion survey found that most Chinese women wouldn't consider marrying a man who doesn't own a home. As a result, families often loan or give money to help their sons buy one. That, along with rural residents migrating by tens of millions to the cities, means China's hunger for real estate is unlikely to be appeased soon.