On the effectiveness of housing purchase restriction policy in China: A difference in difference approach

• Main Authors: CAO, Jerry X., HUANG, Bihong, LAI, Rose Neng
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2015
• Subjects: Housing purchase restriction policy; housing bubble; China; difference in difference; Asian Studies; Finance; Real Estate
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6451; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7450/viewcontent/SSRN_id2584275.pdf
• Institution: Singapore Management University

The Chinese government imposed the purchase restriction policy to rein in the housing bubble in 2010. Using a two-stage difference-in-difference approach and a comprehensive dataset covering the real estate markets across 70 cities, we find that the policy triggered substantial decline in the property price and transaction volume. Cities having higher reliance on real estate sector for fiscal revenue and economic growth experienced greater decline in housing prices following the policy implementation. However, the policy had no measurable effects on the nationwide construction boom, hinting the ineffectiveness of the policy to correct the housing bubble.