Is local government the driving force behind the surging housing price in China? Evidence from rental, land and housing markets

• Main Authors: Qian, Jin, Lai, Yi Wen, Lee, Choon Yan
• Other Authors: School of Humanities and Social Sciences
• Format: Final Year Project
• Language: English
• Published: 2012
• Subjects: DRNTU::Social sciences::Economic development::China; DRNTU::Social sciences::Political science::Political institutions::Asia::China
• Online Access: http://hdl.handle.net/10356/50803
• Institution: Nanyang Technological University

Housing prices have soared for the past decade in China, more evidently from the 35 major cities. Apart from traditional economic fundamentals, recent literature review suggests that local government is an active player that may lead to the surging housing price in China. In our paper, we consider rental, housing and land markets as interdependent and simultaneously determined. On this basis, we study the interplay of the three markets using a panel data for the 35 major cities from 2001 – 2010. The empirical results provide evidence that the higher the local government budget deficit, the higher the land price would be and this higher land price is translated into higher housing price. This paper explores local governments’ role from both expenditure and revenue side in the whole picture of housing market.