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"High and rising prices in Chinese housing markets have attracted global attention, as well as the interest of the Chinese government and its regulators. Housing markets look very risky based on the stylized facts we document. Price-to-rent ratios in Beijing and seven other large markets across the country have increased from 30% to 70% since the beginning of 2007. Current price-to-rent ratios imply very low user costs of no more than 2%-3% of house value. Very high expected capital gains appear necessary to justify such low user costs of owning. Our calculations suggest that even modest declines in expected appreciation would lead to large price declines of over 40% in markets such as Beijing, absent offsetting rent increases or other countervailing factors. Price-to-income ratios also are at their highest levels ever in Beijing and select other markets. Much of the increase in prices is occurring in land values. Using data from the local land auction market in Beijing, we are able to produce a constant quality land price index for that city. Real, constant quality land values have increased by nearly 800% since the first quarter of 2003, with half that rise occurring over the past two years. State-owned enterprises controlled by the central government have played an important role in this increase, as our analysis shows they paid 27% more than other bidders for an otherwise equivalent land parcel"--National Bureau of Economic Research web site

For many analysts, the Chinese economy is spurred by a bubble in the housing market, probably driven by the fiscal stimulus package and massive credit expansion, with possible adverse effects to the real economy. For example, the stock of loans increased by more than 50 percent since the end of 2008. The government urged banks to increase lending to mitigate the economic slowdown. Home mortgage loans have played a significant role in the development, as they account for one third of the total lending activities. Banks have provided easy credit for housing development, probably without sufficient evaluation of risks. State-owned enterprises may have stimulated the development, as they have access to low cost capital and may believe they are too big to fail. In this paper, the house price development is investigated both at the national and regional level. First, it is investigated whether a bubble exists. Analysis is based on a long run equilibrium between real house prices and demographic and macroeconomic conditions. Using a regional dataset for 35 major Chinese cities, the size of the bubble is estimated relative to the fundamental level implied by the panel cointegrating relationship. Second, the impact of real house prices on CPI inflation and GDP growth is investigated at the national level using an in sample and out of sample framework. The results indicate the presence of a house price bubble. Real house prices are 25 percent above their equilibrium value. The bubble is especially pronounced in the cities of the southeast coastal areas and the special economic zones. While the impact of real house prices on CPI inflation seems to be rather strong, GDP growth may not be heavily affected. Real house prices do not cause GDP growth, and point forecasts of GDP growth are not improved if the house price evolution is taken into account. These findings might reflect a limited exposure of private households expenditures to housing wealth. Therefore, a decline of the bubble could have only modest effects on the course of the real economy.

AbstractUsing a comprehensive data set of housing transactions in Beijing, China, we find that government officials are more likely than non‐officials to buy housing units before the government‐imposed housing purchase restriction policy. We also find that officials use their power to speed up the loan application process and pay higher prices to complete the transactions before the policy. Overall, the results suggest that officials trade on private information gained during the policymaking process.

It has been more than three decades since China embarked on nationwide reforms directed towards establishing a marketised system of housing provision. This reform process has had significant implications for housing consumers, especially their housing affordability, which was the starting point of this research. The investigation of the characteristics of the housing affordability problem, and of its contributory causes and consequences is guided by three research questions. What are the defining characteristics of the Chinese housing system and how have these characteristics evolved under the housing reforms since 1980? What are the responses of consumers to the way the Chinese housing system has developed? How have policy strategies that are designed to improve housing affordability been applied in China? The research questions are investigated first through using an institutional perspective to interpret the development of the Chinese housing system over the reform period. This is supported by a case study of housing outcomes and the application of housing policies in a major Chinese city, Wuhan, and a comparative study of the housing reform path and outcomes of a comparable transitionary economy, Russia. The research findings reveal the shifting power relations between the state apparatus and market institutions in the Chinese housing system as being critical to housing outcomes. The present system is characterised as having a distinctive hybrid state-market relationship, with the government exerting fundamental influence, especially through its multiple roles as direct market participant, a regulator of market activities and a major patron of affordable housing production. The significance of the research is threefold. First, the newly conceptualised examination of the Chinese housing system provides a lens to explore the structural factors driving its operation and contributing to housing problems presently. Second, the case study informs a broader understanding of the trade-offs that income-constrained ...