The Impact of Digitization on Housing Prices: Evidence from China

Abstract

Issues: The housing prices (HP) in China has been rising over the past 20 years, which is too extremely high to afford for citizens. Also, high housing prices results in various problems, such as increasing financial risks, a shift from physical economy to virtual economy, innovation obstacles, crowding out residents’ consumption, among others. Objective: This study strives to investigate the impact of digitization on HP, with an aim to explore an effective way to tackle high housing prices issue in China. Theoretical Framework: Digitization can essentially effluence the HP through various channels, such as promoting the economic efficiency, improving the infrastructure, affecting the population agglomeration, and increasing the availability for residents to work remotely, etc., whereby it plays a substantial role in curbing the housing prices. Method: With a sample of 279 cities covering the period from 2011 to 2019, a dynamic panel method, General Method of Moment model (GMM) is adopted to run the empirical analysis. Results: The empirical results confirm an inverted U-shaped relationship between the HP and digitization, which indicate that digitization (DIG) acts as an impetus to increase HP at the first stage, but when the digitization surpasses the turning point, it may exsert a powerful force to lower housing prices. Implications: Improving the digitization is among the solutions to curb high housing prices, as long as the digitization exceeds the inflection point. Originality: This study first concludes digitization can be a considerable effluence on housing prices, providing a new insight into solving high housing prices.