Analysis of the Impact of Government Policies on Supply and Demand in China's Real Estate Markets in First-tier and Second-tier Cities

Abstract

Due to changes in demographics, urbanization, and economic development, the Chinese real estate market has intrigued many analysts in the last three decades. To begin with, it is necessary to know more about the nature of this market since it plays an essential role in the country's economic development and in improving the standard of living of its population. The importance of the real estate industry cannot be overemphasized in the context of China, specifically in terms of the financial structure, urbanization, and social welfare. Hence, evaluating government policies in this regard is crucial to understand further, how and why they work or fail, along with the impact on the growth of cities. Thus, this paper aims to provide an overview and qualitative analysis of the Chinese real estate market's government policies between first- and second-tier cities, focusing on supply and demand. The actual policies include purchase restrictions, availability of land, and monetary policies, and the effects of actual policies are discussed for various tiers of cities. The study establishes that first-tier cities are highly priced and competitive due to high supply and demand, while second-tier cities are variably priced and could be oversupplied. These issues need more profound and local policy suggestions to understand specific heterogeneities of various Chinese urban property markets and strive for the mutual and relatively balanced growth of different city clusters.