The luxury apartment buildings Yang Xuhua passes on her way to work are a daily reminder of her own frustrated efforts to buy a home. Prices for even modest apartments in Shanghai have soared, putting home purchases out of reach for white collar workers and professionals.
Yang and many other young Chinese are finding their aspirations thwarted by an overheated property market that is enriching already wealthy speculators, local officials and other Communist Party allies.
It's a hard reality for a generation that views home ownership as a given after reforms more than a decade ago created a housing market open to the masses. It's also a challenge for leaders whose reliance on rising property values and land sales to property developers risks letting the market spiral out of control.
"I sigh at every fancy apartment building I see on the way to work everyday, but that won't change anything," says Yang, whose train ride to work at a trading company takes her past legions of high-rise apartment blocks. "My salary increases but it can't catch up with rising housing prices."
The issue is getting top billing at China's annual legislative session, the party's main forum for explaining its policies and responding to public complaints.
"We will resolutely curb the precipitous rise of housing prices in some cities and satisfy people's basic need for housing," Premier Wen Jiabao pledged in his annual address to lawmakers, China's equivalent of the State of the Union speech.
The government has raised taxes and required downpayments — now a minimum 30 percent for even first-time home buyers — and warned big state companies and banks against speculative, risky investments. But no major immediate changes are expected.
"Chinese top leaders have become more and more sensitive to strong nationwide voices on issues, but the sensitivity is only at the PR level," says Ding Xueliang, a China expert at Hong Kong's University of Science and Technology.
Rising property prices have underpinned economic growth rates, benefiting local governments that tend to be heavily invested in property development and other related businesses. Land sales often help finance construction projects that are also a lucrative source of income for many officials.
"The central government will say things to please the popular mood, but local governments have way too many vested interests in the property market to make major changes," said Ding.
Property prices have risen almost constantly since China set up a commercial housing market in the late 1990s, allowing families to buy, at deep discounts, the low-rent government-owned apartments they were living in.
Since then, real estate has burgeoned into one of the country's biggest drivers of growth, a creator of vast numbers of jobs in construction and related industries and — as elsewhere — a source of much of the country's wealth.
Rising housing prices have benefited many. But younger Chinese hoping to replicate their parents' homeowner lifestyles, and the legions of rural Chinese now moving to the cities, are priced out of the market.
Yang says she broke up with her boyfriend over the issue, fretting that a huge mortgage would be too great a burden for a young family.
A flood of bank lending meant to fend off recession pushed property sales up 75 percent to 4.4 trillion yuan ($644 billion) last year, making China the world's biggest property market, by some estimates.
"I really have no idea of what to do about housing prices. Unless you get help from your parents or earn more than 500,000 yuan ($73,000) a year, you can't afford to buy," said Shen Junlong, a 29-year-old IT manager at a company affiliated with Shanghai's Baosteel Group.
"Living costs are always higher than what you can put in the bank," said Shen, whose 160,000 yuan ($23,530) annual income is about four times the national urban average.
Sales volume has slowed in recent weeks following the government's latest market-cooling measures but prices continued to rise. Real estate agent Century 21 reported deals in Shanghai averaging 15,000 yuan ($2,200) per square meter in February.
In Beijing and Shanghai, residential prices soared to an average of more than 12,000 yuan ($1,700) per square meter, double the level three years ago, according to a December report by U.S. bond manager Pimco.
Expensive luxury units account for the bulk of sales; Pimco estimated that only 10 percent is to the mass market.
On the tropical island of Hainan, a resort and golf-course building boom has pushed prices still higher.
Given China's huge 1.3 billion population, scarce land and rapid urbanization, prices are bound to rise. But the skyrocketing prices of the past few years have many accusing property developers and local officials of hoarding land and properties so they can sell them later at higher prices.
Meanwhile, aspiring home owners like Yang find themselves outbid by wealthier buyers who snap up apartments so as to "flip" them for huge profits as prices rise.
To discourage such speculative buying, regulators have raised bank reserve rates and adjusted other policies affecting land and housing sales.
But broader moves are needed to reduce risks from property investments made without regard for potential returns, says Tao Wang, an economist at investment bank UBS. She puts the potential for nonperforming loans over the next few years at 2.5 trillion yuan-3 trillion yuan ($367 billion-$440 billion).
"It is critical for the government to manage its macro policy and urbanization process now to avoid runaway lending, investment, and a big land-property related bubble," she wrote in a recent report.
Most analysts say China is unlikely to face the kind of U.S.-style credit implosion that touched off the global financial crisis.
Residential mortgages here are relatively low risk, given the high required downpayments. Chinese banks have barely dabbled in the types of mortgage-related financial derivatives that triggered the U.S. property meltdown, and levels of debt remain low compared with many other economies.
Yet with prices stalled at untenably high levels, public angst over out-of-reach housing shows no sign of abating.
The government has repeatedly pledged to ensure a greater supply of so-called "economy housing" and is expanding programs to provide subsidized rental housing to low-income families. But the agenda does not include basic reforms, such as a property tax, that might help counter the market's tendency toward frothing into bubbles.
Fed up with haggling over prices she can't afford, lawyer Ling Junyi gave up and moved to Singapore.
"My salary is not bad, compared with other Shanghainese my age, but if I want to buy an apartment it is impossible, or very, very hard," says Ling.
Singapore's housing is also pricey, but interest rates there are lower, and salaries higher, she says.
"I don't want to be a slave to my house," said Ling. "I want an apartment of my own, but in Shanghai it's just more than I can afford."
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