Why Housing Prices Are Falling

Peter Lee

A popular saying has been circulating recently: people who were once dismissed as “unambitious” have unexpectedly become the real winners of today’s society—simply because they never took on a mortgage. By contrast, those who once looked successful and confident as property investors now find themselves trapped in heavy debt and constant anxiety. Many are puzzled: how did homes purchased at high prices become a burden overnight—assets that cannot be sold and cannot be comfortably held? What exactly happened?

The sharp decline in housing prices is not driven by a single factor. It is the result of several forces converging: the economic cycle, deglobalization, the retreat of urbanization, and a fundamental shift in supply and demand.

1. The Economic Cycle: A Force No Individual Can Resist

Housing markets rise and fall with the broader economic environment; they are never independent from it.

Over the past two decades, globalization and rapid urbanization fueled one of the longest and most stable economic expansions in nearly a century. Jobs were abundant, incomes rose, and millions moved into cities. Real estate naturally flourished.

But since 2023, the global economy has entered a downturn:

      •    Job opportunities have shrunk

      •    Household incomes have stagnated

      •    Young people are less willing to marry or have children

      •    Interest in buying property has weakened significantly

When demand collapses during an economic downturn, real estate inevitably enters a declining phase. Moreover, after such a prolonged boom, the subsequent contraction is often deeper and longer. That means the correction in housing prices is unlikely to reverse quickly.

2. The Retreat of Globalization and the Rise of “Reverse Urbanization”

For over 20 years, globalization was the key force driving the housing boom across many Asian economies, particularly in China.

Globalization brought:

      •    Factory expansion

      •    Massive employment

      •    Millions of migrant workers moving to cities

      •    Education, healthcare, and services clustering in urban centers

      •    Rapid population concentration

What determined housing prices was never just bricks and concrete. It was the “urban premium”:

job opportunities, education quality, medical resources, social security, and a mature commercial environment.

These factors accounted for most of the price—far beyond construction costs.

But as globalization retreats, industries move elsewhere, and cities lose their economic magnetism, a reverse trend has emerged:

      •    Factories shut down or relocate

      •    Urban job markets shrink

      •    Migrant workers return to their hometowns

      •    Young people leave expensive cities for regions with lower living costs

When the “urban premium” evaporates, housing prices can only fall back toward their fundamental level—essentially, construction cost.

This explains why some areas are seeing dramatic price declines: the expectations once embedded in housing values no longer exist.

3. Structural Oversupply: A Market Built on Borrowed Time

For more than two decades, rapid urban construction was financed largely by homebuyers and investors. Their down payments and mortgages became the fuel for city expansion.

In many ways:

local governments captured the upside, while property investors bore the risks.

Fueled by optimistic narratives and information asymmetry, investors continued pouring money into property, while city administrators benefited from:

      •    Land sales

      •    Real estate taxes and fees

      •    Infrastructure-driven GDP growth

      •    Rising public-sector salaries

Meanwhile, the housing stock grew far beyond real demand:

      •    New districts with low occupancy rates

      •    Slowing population growth

      •    A flood of second-hand listings

      •    Excessive new housing supply for many years

The market was essentially pre-consumed during the boom years. When real demand could no longer keep pace with supply, prices had only one direction to go—down.

Conclusion: The End of an Era

Many property investors today find themselves in disbelief:

people who once couldn’t afford a home are now carefree, debt-free, and relaxed;

meanwhile, those who worked hard to “get ahead” through property investment are burdened with liabilities and uncertainty.

The reality is simple:

the decline in housing prices is not a personal failure—it is a structural, epochal shift.

Economic cycles, deglobalization, industrial relocation, demographic changes, and oversupply have fundamentally reshaped the logic of real estate. In front of such large forces, individual effort or foresight often becomes insignificant.

Understanding this helps people let go of guilt and anxiety, and recognize the truth:

the golden age of property investment has ended.