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Does China face a housing affordability issue? Evidence from 35 cities in China

Author

Listed:
  • Weida Kuang
  • Xiaowei Li

Abstract

Purpose - The purpose of this paper is to examine the degree of housing affordability in China's 35 large and medium cities. Furthermore, this paper investigates the relationship between housing affordability and the house prices using data from China's 35 large and medium cities from 1996 to 2007. Design/methodology/approach - This paper constructed the housing affordability index and classified cities in terms of their housing affordability degree. OLS, unit root test and cointegration test have also been used in the empirical test section. Findings - The results exhibit that the housing price has played a more important role in housing affordability than household income. Thereby, decreasing housing price is more important than household income to alleviate the housing affordability problem. Meanwhile, housing size has exerted a great impact on housing affordability. Accordingly, developing more affordable houses is an alternative to mitigate the housing affordability issue in China. In addition, it is also found that the housing reform facilitates the housing affordability issue due to the low sale price of the public houses; the population growth rate and geographic locations have no significant impact on the housing affordability. Research limitations/implications - In terms of the research limitations, the heterogeneity factor may be introduced considering the regional heterogeneity of cities in China. Therefore, researchers are encouraged to test the propositions with enriched datasets. Practical implications - Practical implications are that decision‐makers in government should pay close attention to the risk of the housing bubble. That is, the soaring house price was driven by investment instead of by the demand side. Originality/value - This paper contributes to defining the dynamic upper boundary of the percentage of housing expenditure to income ratio via Engel's coefficient using the housing market data of 35 large and medium cities in China from 1996 to 2007.

Suggested Citation

  • Weida Kuang & Xiaowei Li, 2012. "Does China face a housing affordability issue? Evidence from 35 cities in China," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 5(3), pages 272-288, July.
    • Handle: RePEc:eme:ijhmap:v:5:y:2012:i:3:p:272-288
    DOI: 10.1108/17538271211243607
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    Citations

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    Cited by:

    1. Xiang Cai & Chin-Chang Tsai & Wei-Ning Wu, 2017. "Are They Neck and Neck in the Affordable Housing Policies? A Cross Case Comparison of Three Metropolitan Cities in China," Sustainability, MDPI, vol. 9(4), pages 1-16, April.
    2. Squires, Graham & White, Iain, 2019. "Resilience and housing markets: Who is it really for?," Land Use Policy, Elsevier, vol. 81(C), pages 167-174.
    3. Ahlam Labin & Adi Che-Ani & Syahrul Kamaruzzaman, 2014. "Affordable Housing Performance Indicators for Landed Houses in the Central Region of Malaysia," Modern Applied Science, Canadian Center of Science and Education, vol. 8(6), pages 1-70, December.
    4. Xiang CAI, 2018. "Determinants Of Affordable Housing Allocation: Common Perspectives From Local Officials," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 227-237, July.

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