Accessibility of Homeownership in Urban China: An Empirical Study of Borrower Characteristics and the Housing Provident Fund

Abstract

Accessibility to loans for house purchases in urban China is problematic. Continuing governmental efforts to control rising house prices has affected consumers' ability to find funding, with different consequences for the various buyer segments of the population. These result from differences in their demand for homeownership, which is reflected in success rates for gaining home loans. A better understanding of the underlying demand for homeownership and the demographic characteristics of borrowers would likely assist the government in its effort to develop policies to enhance accessibility to loans in general, and housing providence funds (HPF) in particular. A finer understanding of these characteristics could thus lead to a more comprehensive loan strategy. This would enhance the government's ability to address some of the equity issues that arise from its efforts to control housing markets. To address this issue, this paper develops and estimates a binary logit model of homeownership participation in HPF program, with a focus on accessibility to HPF loans. The estimates were generated using a variety of demographic variables. Our findings document that people with longer histories of employment and married households are more likely to access credit and therefore to own a house. Analysis also shows that gender, marital status, education level, high annual income and duration of employment are significantly related to HPF loan use for homeownership. These borrower demographic characteristics are thus significantly related to loan accessibility.