In essence, similar to the financial industry in the United States, China's real estate sector is "too big to collapse". Therefore, it would not be an exaggeration to say that the real estate sector has hijacked the Chinese economy.

The vested interest groups actually are using all the skills at their disposal to increase housing prices. The higher the prices, the more profit property developers, banks and investors (speculators) make and the more revenue local governments can collect.

Driven by this interest chain, the housing market bubble is getting bigger and bigger. But the value of no property can rise infinitely, especially in China.

The country's real estate market has deviated from the state of "a balance between supply and demand" in the economic sense. On one hand, a large number of commercial houses are lying unoccupied. On the other, prices in major cities are making property increasingly unaffordable for the majority of the population.

The skyrocketing housing prices are the outcome of artificial speculation. Real estate is essentially a kind of social product and depends on purchases and accommodation of the majority of the population. Once speculators start dictating terms in the housing market, the property industry cannot maintain sustainable development.

Amid the recent calls for strengthening control over the housing market, some local governments proposed property taxes. But their aim is not to cool down the realty market but to collect more revenue.

Seeing an imminent end to land-based revenue, local governments have realized the need to open up new sources of revenue. Many analysts have already said local governments will play a leading role in introducing new or higher taxes on property.

To some extent, the real estate industry has become a strong force resisting China's industrial upgrade and transformation of its economic growth model, because as long as developers can reap huge profits, the housing market will continue to attract more and more investment, diverting them from the scientific innovation, education and other sectors.

Though the real estate industry can bring huge profits for some groups in a short time, it has become a big hurdle on the road to sustainable economic development and rising housing prices have become the main cause of public dissatisfaction. The bloated real estate sector is destroying the base on which society could develop because Chinese, in general, believe "dwellers should hold the dwellings".

More importantly, the real estate bubble, if not defused in time, may become a political crisis. In the short run, more and more people won't be able to afford a house or even rent a room. In the long run, it could sharpen social conflicts and lead to social unrests.

A deformed growth of the real estate industry will squeeze the space for maneuverability and development of other sectors. As a result, the government's tax base will shrink. And once faced with a fiscal crisis, the government will make every effort to milk the people.

The possibility of social instability is becoming real as the housing and related land issues worsen by the day.

The author is professor and director of East Asian Institute, National University of Singapore.