Abstract
ABSTRACT Facing skyrocketing housing prices, the Chinese government implemented a policy of home purchase limits to maintain stability and sustainability in the residential property market. This paper aims at gauging the causal effect of the home purchase limits policy on housing prices, by replicating a quasi-experimental test with yearly data on 287 Chinese cities from 2007 to 2013. Based on a difference-in-differences matching estimator to control for observed and time-invariant unobserved city heterogeneity, we find that the policy led to decreased housing prices, and the decrease was contingent on the level of enforcement of the policy. The more strictly the policy was enforced, the more the housing prices dropped. Overall, our analyses highlight the importance of government intervention in the property market.
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