Yesterday my landlord came demanding 500 yuan more a month – from 3000 to 3500. Two of my other friends who’ve resigned leases report the same (though from bases of 2500 and 5000, both 500 increases [at least we got a new couch out of it]). A straw poll of my adult students here shows a remarkable rise in real estate prices. We’re talking home prices going up 300% in less than five years. My own 75m apartment is worth about $130,000. I could buy a 3 bedroom house in my hometown for that. Let me answer a simple question a lot of people are asking: is there a housing bubble?

I don’t think so.

I think there’s two big reasons why not. The first is that half of Shenzhen people are living on what is officially farmland. They’re living shoulder-to-shoulder with each other in cheap units that are not for sale because they’re not supposed to be there. I’m looking east outside my 29th story window  now at my entire neighborhood (click here, we’re the white buildings along the wide road at bottom). Everything straight down and north of me is “real” urban property developed into what are locally called “gardens”. Straight ahead, to the east, is the most densely packed farmland you’ll ever set your eyes on. Usually seven-story buildings with alleys, little restaurants, and even a village where people draw water from a well. Most of these people aren’t poor. They’re mostly working white-collar jobs saving to buy a house. About 1km further is a brand new mall with Gucci and all that goodness. Then theme parks and on to Overseas Chinese Town. All those people down there want to buy what I’m renting right now. All of them. Unscientifically speaking, there’s a lot more of them down there than us up here.

The second issue is cultural. No house, no wedding. Not every single girl in China is like that but most of them are. My good friend who just got hitched sold his factory and moved off to Hainan where he thinks he can get a new job and a house at a reasonable price. It’s that important. This means there’s not as much pressure on the rental market – which is how I’m able to rent for about half the price of a similarly priced American house. People don’t mind living in “bad” housing if it means saving for a real house.

The government is already taking action to stop speculation. There is no “flipping” like we saw in America. Instead there’s a lot of holding. People who’ve bought houses on the outer edges of Shenzhen who are holding on to their units and waiting to sell. It’s driving prices up, sure, but I don’t think there’s anything artificial about this. This is the rise of the largest middle class on the planet. They want nicer things. Car sales are up 40% per year. Is anyone saying that’s a bubble?