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Until 1999, most of people in China's urban area had lived under the welfare housing system in which the government provided nearly free housing for urban residents. All employees from government agencies, academic and public institutions, state owned companies, received allocated housing from the government or their work units. In March 1998, Chinese Premier Zhu Rongji introduced a package of reforms that included a series of housing reforms -intended to stimulate the domestic economy. He declared that subsidized housing traditionally available to Chinese workers would be phased out and that workers would be encouraged to buy their own homes or pay rent closer to real market prices. The reforms called for workers to use their savings, along with the one-time housing subsidies they receive, to purchase their own houses. The government announced in August 1999 that all vacant residential housing units built after January 1, 1999 were to be sold, not allocated. Since then, the private housing market has experienced tremendous growth.

Actuated investment in China's real estate development in 1999 was reportedly at RMB $401 billion (about U.S. $48.43 billion), up about 10 percent from 1998. From January to November of 2000, the total investment in the real estate sector has reached 374.4 billion RMB (about U.S. $45 billion). Meanwhile, 410 million square meters (4.41 billion square feet) of residential housing were built in 1999, an increase of 19.6 percent from the previous year. China Securities, a Chinese magazine reported that China would build 486 million to 549 million square meters (5.23 billion to 5.91 billion square feet) of new residential houses every year during the first 20 years of the 21st century. In 2000, commercial housing construction has increased 17.9%, finished construction area increased 22.3%, sales volume increased 38.8%, and housing purchase increased 44.5% over the same period in 1999.

Xie Jiajin, the director-general of the Department of Housing and Real Estate in the Ministry of Construction, reported at the January 9, 2001 National Housing Reform Conference, that over 80 percent of the allocated public housing in China have already been sold to workers or employees. A new property ownership structure dominated by the private ownership along with other types of ownership forms has taken root in China.

A study completed by the Sinomonitor and the British Market Research Bureau (BMB), indicated that from 1999 to 2000 the percentage of homeowners in China urban areas rose nearly 10 percent, from 49.9 percent to 59 percent. There is no doubt that the housing reform in recent years has boosted home purchase and construction in China.