The first, Chinese banks. They are making money from two sides: the developer, and the home buyer. The developers borrow from the banks; they will pay interest and principle (hopefully) later on. The home buyers borrow from the bank, and pay mortgage (interest and principle).
The second, developers. It’s not hard to understand, as the market booming, the developer can charge more for the same apartment or villa.
Last but not least, the local goverment. The land in China are owned by the goverment, the developer will pay more for the new land as the housing price go up. The goverment wants its fair share of the profit too. In addition to the land, the goverment will collect more tax and fees as the housing price go up. So, as much as the (central) goverment wanted to control the housing price (we all want a harminious society, right?), the local goverment don’t think so, at least from economy side.
Real estate brokers also benifit somewhat. But like many things in China, there are too much competition nowadays, which bring down the profit. The leading economy hotel chain Home Inns had similar headache. So is the cell phone industry, auto industry, online game industry, advertising industry, etc.
One may ask how about the competition in the banks and real estate developers? Well, there are competitions, but not as tough as other industries I mentioned above. It’s much harder to open a bank, if at all possible. As to real estate developers, the goverment “clamp down” policies in recent years weakened (if not eliminated) many small developers, it actually help the big player such as Vanke.
Will China has a similar mortgage problem like the sub-prime problem in the US? I am not expert on this. But Paul argued China has a worse problem on mortgage. I don’t agree with it but thought it’s an interesting idea. By the way, the Chinese banks recently tightened the housing loans, especially in red hot Shenzhen (by Hongkong).