Workers and Merchants

For salaried workers, the typical purchase is a standard residence. It's not that they dislike luxury homes—they do—but even an ordinary apartment requires them to stretch themselves thin just to afford it.

Where does their income come from? Wages, and the jobs that pay them.

In other words, if they expect their earnings to climb steadily or find that the job market is warm and hiring fast, their risk appetite rises. They become willing to take on debt and leverage up for big-ticket purchases.

With business owners, the dynamic flips.

When business is booming, no one rushes to buy a mansion. In The Ordinary World, Sun Shao'an's wife wanted him to build a tiled-roof house, but he refused. Why? Because a thriving business let him expand his brick kiln and make more money. Pouring cash into a showy house in the village would only have cost him a far greater wealth opportunity.

From a businessman's standpoint, the worse trade gets, the more likely he is to buy a luxury property; the better trade gets, the more likely he is to redeploy that capital back into the market.

If you want to understand the market, data is only a reference point—expectations are what matter.

The easier it is to find a job and the faster salaries rise, the stronger salaried workers' desire to spend becomes. The easier it is for tech companies to go public and raise capital, the stronger the spending appetite of the software-engineer middle class swells. And the worse business gets—the colder the market, the quieter the streets—the higher the urge for bosses and entrepreneurs to splurge on luxury homes.