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The Housing Market Effects of Local Home Purchase Restrictions: Evidence from Beijing

Author

Listed:
  • Weizeng Sun

    (Jinan University
    Tsinghua University)

  • Siqi Zheng

    (Tsinghua University
    Massachusetts Institute of Technology)

  • David M. Geltner

    (Massachusetts Institute of Technology
    Massachusetts Institute of Technology)

  • Rui Wang

    (UCLA
    The Johns Hopkins University)

Abstract

Home prices have surged in major Chinese cities, leading to concerns of asset price bubbles and housing affordability. The policy of home purchase restrictions (HPR) has been one of China’s harshest housing market interventions to squeeze out speculative demand and dampen the soaring home prices. Beijing was the first city to implement the HPR. Employing the regression discontinuity design technique, we find that Beijing’s HPR policy triggered a 17–24 % decrease in resale price, a drop in the price-to-rent ratio of about a quarter of its mean value, and a deep (1/2 to 3/4) reduction in the transaction volume of the for-sale market, with no significant change in the rent or the transaction volume of rental units. In submarkets where housing supply was less elastic, the effects of the HPR were larger in price and smaller in quantity, suggesting that wealthy buyers likely benefited more from the HPR. The scope of the analysis does not allow conclusions regarding the persistence or longevity of these effects.

Suggested Citation

  • Weizeng Sun & Siqi Zheng & David M. Geltner & Rui Wang, 2017. "The Housing Market Effects of Local Home Purchase Restrictions: Evidence from Beijing," The Journal of Real Estate Finance and Economics, Springer, vol. 55(3), pages 288-312, October.
    • Handle: RePEc:kap:jrefec:v:55:y:2017:i:3:d:10.1007_s11146-016-9586-8
    DOI: 10.1007/s11146-016-9586-8
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    References listed on IDEAS

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