This paper explores the role played by structural transformation and the resulting relocation
of workers from rural to urban areas in the recent housing boom in China. This development
process has fostered an ongoing increase in urban housing demand, which, combined with a relatively
inelastic supply due to land and entry restrictions, has raised housing and land prices. We
examine the issue using a multi-sector dynamic general-equilibrium model with endogenous ruralurban
migration and endogenous housing demand and supply. Our quantitative results suggest that
the development process accounts for eighty percent of housing price movements across all urban
areas and this mechanism is ampliÖed in an extension calibrated to the two largest cities where
housing booms have been particularly noticeable. Overall, supply factors and productivity account
for most of the housing price growth. Upon checking the robustness of the baseline model, we Önd
that market fundamentals such as structural transformation remain as key forces of Chinaís housing
boom.