In 2016 China’s house prices achieved record growth in some cities and negative growth in others. This paper studies both induced and imposed institutional changes in China’s housing market that give rise to the formation of the national housing investment market (NHIM), using Suzhou, a rapidly emerging industrial city neighbouring Shanghai, as a case study. It argues that NHIM, an induced institutional change, offers opportunities to the private sector and local governments for profits and revenues by generating housing price inflation. On the other hand, the state has been reluctant to hamper NHIM and only imposes rules to restrict their activities when it sees the need. The Suzhou case illustrates that NHIM has been effective in supporting surplus building activities and is powerful enough to cause hyper house price inflation in cities it sees potential. The paper concludes that housing policies in countries with NHIM or without barriers to foreign investment need to take account of the impact of external purchasing power to avoid the excessive house price inflation generated by inward housing investment.