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Examining the impact of home purchase restrictions on China's housing market

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  • Lu, Zhentong
  • Zhang, Sisi
  • Hong, Jian

Abstract

This paper studies the impact of home purchase restrictions on China's housing market. We estimate a structural model of household preference for housing, real estate developers' pricing decisions, and equilibrium market outcome in five large cities. By comparing the estimation results from pre- and post-policy intervention, we find that, after home purchase restrictions are implemented, overall housing demand in most cities becomes weaker and less price elastic; meanwhile, real estate developers face higher holding costs and thus are willing to lower prices and sell more quickly. Counterfactual analyses show that in some cities alternative policy designs that cause less structural change of demand could achieve larger consumer welfare and social welfare than the implemented policy.

Suggested Citation

  • Lu, Zhentong & Zhang, Sisi & Hong, Jian, 2021. "Examining the impact of home purchase restrictions on China's housing market," China Economic Review, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:chieco:v:67:y:2021:i:c:s1043951x21000389
    DOI: 10.1016/j.chieco.2021.101620
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    Cited by:

    1. Huifu Nong, 2024. "Integration and risk transmission across supply, demand, and prices in China’s housing market," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-28, June.

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    More about this item

    Keywords

    Housing demand; Housing supply; Home purchase restrictions; Structural model;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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