Housing In China Research Articles

Who owns China's housing? Endogeneity as a lens to understand ambiguities of urban and rural property

When considering development and urbanization, a critical question relates to the institutions on the basis of which these ought to be achieved. Formal, private and titled property rights are oft considered as essential in this. However, contrary to the notion that such rights can be exogenously designed and implemented, this paper ascertains that the property rights of Chinese housing stem from endogenous development. The institutional amalgam of contradictory, overlapping and opaque rights points to endogeneity – resultant from actors' multitudinous interactions, bargaining and conflict – rather than the reverse. The housing property rights are analyzed in an evolutionary sense around ownership as an idealized concept. In so doing, the paper describes how the Chinese housing rights' structure developed into its current form; what has been commercialized and what not; and what is formally defined and what not. The analysis covers a half century: the collectivist period since 1962 until the present, with a focus on the time since the 1998 Housing Reforms. The analysis includes the main types of urban and rural housing. In light of the endogenous structure of China's housing, the article cautions against precipitous institutional intervention, and contends that formalization and titling should proceed with great care.

Mapping China's Time-Varying House Price Landscape

The recent increase in China’s house prices at the national level masks tremendous variation at the city level – a feature largely overlooked in the macroprudential literature. This paper considers the evolving heterogeneity in China’s house price dynamics across 70 cities and assess the main deter-minants. We gauge the heterogeneity of house price dynamics using a novel regime-switching modelling approach to estimate the time-varying patterns of China’s city-level housing price synchronization. After sorting city-level housing prices into four clusters sharing similar cyclical features, we see that each group shows increasing synchronization in the years leading up to 2015, and a decoupling pattern thereafter. We document high synchronization within each of the clusters of cities, but low synchronization among them. The empirical evidence suggests that differentials in the growth of households, income, investment and even differences in air quality explain housing price synchronization among cities.

The impact of China's housing provident fund on homeownership, housing consumption and housing investment

In the absence of well-functioning credit and mortgage markets, the Chinese government has implemented several reforms to encourage home purchases. Among the most prominent of these is the Housing Provident Fund, which requires employers and employee contributions to a pool which is later used to make mortgage loans to participants. We use the 2011 Chinese Household Finance Survey and a smaller survey from Jinan, Shandong province to examine the extent to which the Fund encourages the acquisition of owner-occupied housing. We find that fund participants are more likely to be owner-occupiers, although they also purchase smaller properties than they otherwise might have, due to the down payment restrictions on mortgage loans. The HPF also encourages housing investment, but to a lesser extent.

Is Residential Housing Affordable? An Improved Price-to-Income Ratio Approach

Although China's housing affordability issue has been the subject of numerous studies, this paper adopts an improved price-to-income ratio to better reveal and assess the status of housing affordability in China over time. Two research questions will be discussed: (i) Is there a housing affordability problem? (ii) Does the situation of housing affordability improve or worsen over time? Regarding the first question of whether there is a housing affordability problem, down payment ratio and years of installment will be examined, subject to regulation changes for home mortgage loan over time. Regarding the second question of whether the situation improves or worsens, different income categories are classified for comprehensive analysis. The statistical and analytical results have policy implications concerning the nature, extent and duration of housing subsidies, which have been emphasized by government’s guideline (13 April 2010, State Official Document No. 2010-10). Housing subsidies in terms of providing affordable or low rent housing is not effective or efficient to meet the needs of sheltering the poor. Relaxing entry access to bank loans is still of little value, as it renders substantial default risks. An adequate alternative is the adoption of heavily levied property tax, in particular targeting at the upper higher or highest income groups.

Policy failure or success? Detecting market failure in China's housing market

Due to a high vacancy rate of residential homes, housing prices remain sticky in most urban areas of China, which causes higher searching and bargaining costs. With an inefficient outcome, deadweight loss and market failure arises. To assess the Chinese government's housing policies in 2010, we develop a dynamic equilibrium model, in which we demonstrate how the sticky price results in market failure. We apply a multiple-factor panel data model to show that a high degree of market failure is associated with a high ratio of persistent components in the gap between price and equilibrium. As the persistent components will cause the market's instability, we can use the ratio between persistent and mean reverting components as an indicator to supervise the status of the housing market.We investigate the new and second-hand markets in 19 major cities, including 4 municipalities and 15 vice-provincial cities. Through our multiple-factor model, we explore the situation for each city. The results indicate these policies did improve the housing market's efficiency. It is therefore useful for the Chinese government to extend these policies to other areas to include not only big cities, but entire provinces which can improve its economic system efficiency and fairness even when its economic growth is slowing down.

China's housing bubble burst?

AbstractIn this paper, we developed the recursive unit root tests to identify the beginning and end of potential speculative bubbles in the Chinese housing price cycles during 2006–2013 for the 70 major cities of China. The method is best suited for a practical implementation with a time series and delivers a consistent date‐stamping strategy for the origination and termination of multiple bubbles. Simulations demonstrate that the test significantly improves discriminatory power and leads to distinct power gains when multiple bubbles occur. Overall, the results indicate that the speculative housing price bubbles in China are not bursting, and they indicate that the stationarity of the housing price level varies across the different city sizes. Between the cities, approximately one‐fourth of the bubbles have burst up to December 2013, while the first‐tier city bubble may not burst due to the urbanization process.

Asymmetric Fluctuating Behavior of China's Housing Prices

AbstractThe present study explains the reasons for the imbalanced development of the Chinese housing market. Using the quantile autoregression unit‐root test, we examine housing prices in China's five major cities. The results show that the rising and falling of housing prices in these cities exhibits asymmetric reversion. When housing prices fall, market capital is highly sensitive to housing prices, and housing prices resist the pressure to fall further. However, when housing prices rise, the housing market becomes imbalanced, with housing prices tending to overreact in an upturn. The results of this study indicate that when housing prices rise irrationally, the government should intervene in the housing market promptly to prevent housing bubbles.

Doing well by doing good? The case of housing construction quality in China

Construction quality is a major problem in China's housing market. We investigate whether the housing market could provide incentives to encourage developers to promote construction quality beyond the compulsory, minimum standards by testing the financial viability of efforts made in this field by developers. This study takes place in the city of Beijing, where the “Great Wall Award”, granted by the local construction bureau, is used as an indicator of excellent performance in construction quality. Our analysis shows that, from 2005 to 2010, the transaction price in the housing resale market of a unit that received the award can be up to 7.0% higher than a similar unit that did not receive the award. This difference is due to both the higher possible rent and a lower capitalization rate. However, we find no meaningful price premium at the presale stage, while developers with a record of winning the award cannot use such reputation to obtain price premiums in later projects either. These findings indicate a mismatch between the costs and benefits that residential developers face when deciding to enhance the quality of their construction. This mismatch partially explains the current housing construction quality problems in China, and may also discourage future improvements in this field. More efforts from the government are required to correct such market failures.

Hedging House Price Risk in China

The increasing risk associated with China's housing prices is globally recognized. However, hedging this risk is challenging because of a lack of financial derivatives on China's housing assets. We suggest that the short sale of futures contracts for construction raw materials, i.e., iron ore or/and steel, can act as useful tools to hedge the systematic risk of China's new home price. We first present evidence that there is a strong and stable correlation between changes in China's housing prices and global steel/iron ore prices. Using a hedging strategy model, we then show that, during the sample period between 2009 and 2015, 20.6% of the total unpredicted variance in Chinese housing prices can be hedged by shorting rebar and iron ore futures. We further examine this strategy with an event study based on the announcement of the “home‐purchase restriction” policy in April, 2010. The cumulative abnormal returns show that both steel and iron ore prices reacted significantly to this negative shock, and therefore the proposed strategy could substantially help investors offset losses in the housing market. We finally provide some evidences that this strategy can also help investors in specific regional housing markets, or the resale housing markets.

Bubble or riddle? An asset-pricing approach evaluation on China's housing market

Rapid house price growth and high price-to-income ratio in major Chinese cities have aroused a hot debate on whether there is an asset bubble in China's residential housing market. To investigate this question, we employ an equilibrium asset-pricing approach, which suggests a non-arbitrage condition on the rent-to-price ratio. This ratio should be equal to the difference between the user cost of housing capital and the expected appreciation in house prices. Using a novel micro-level data set on pair-wise matched price-to-rent ratio collected in the fourth quarter of 2013, and forecasting the expected house price appreciation based on fundamental factors, our empirical exercises do not suggest the existence of a house price bubble at the national level. However, this conclusion highly depends on the expected income growth rate and may not apply to individual markets.

A Theoretical and Simulation-based Examination of Single versus Dual Agent Models in China's Housing Market

We present and contrast a one-agent versus a two-agent theoretical model for residential real estate brokerage consideration in China's housing market. We also present a series of simulations that employ values present in the Chinese marketplace to identify which system should prevail in terms of degree of commission incentive, agent's search effort, and buyer's utility. We find that in the one-agent model, the search effort of the agent is greater, the buyer's commission incentive is lesser, and the buyer's utility is greater. Therefore, a rational buyer will choose to entrust a buying and selling agent instead of only using a buyer's agent.

A Theoretical and Simulation-Based Examination of Single versus Dual Agent Models in China's Housing Market

We present and contrast a one-agent versus a two-agent theoretical model for residential real estate brokerage consideration in China’s housing market. We then perform a series of simulations using values present in the Chinese marketplace to identify which system should prevail in terms of degree of commission incentive, agent’s search effort and buyer’s utility. We find that in the one-agent model, the search effort of the agent is greater, the buyer’s commission incentive is lesser, and the buyer’s utility is greater. Therefore, a rational buyer will choose to entrust a buying and selling agent instead of only using a buyer’s agent.

Financing Affordable Housing Through Compulsory Saving: The Two-Decade Experience of Housing Provident Fund in China

Housing Provident Fund (HPF), a compulsory saving scheme providing self-funded housing credit, is a significant provider of housing finance in several emerging economies. The Chinese HPF program constitutes the largest social housing finance program in the world. Yet, very few studies have examined it. This paper documents the history of China's HPF program, in particular, how it has evolved from a local experiment to a prominent national housing program. It then examines the program's management structure and the role of HPF lending in meeting China's housing finance needs. The paper also compares China's HPF experience with the HPF practices in other countries. Finally, the paper examines the challenges China's HPF program faces today and the efforts to address them. The paper concludes by discussing some of the broader lessons that can be learned from China's HPF experience.

Embracing off-site innovation in construction in China to enhance a sustainable built environment in urban housing

With the rapid rate of urbanization and pressing need for higher levels of sustainable development within the built environment in China, the housing construction industry presently is facing urgency of shaping a sustainable construction process. This paper examines several sustainability challenges from the large-scale urban housing construction, and explores the connection between off-site innovation and sustainability within a context of China's housing construction industry. The study also identifies four pillars of strategy agendas that could enhance an enabling innovation environment for the ultimate goal of sustainability: (1) institutional environment, (2) public housing market, (3) organisational actions and (4) technological capacity. The knowledge and research findings presented in this paper would provide a ground framework that helps evaluate and assess the significances of off-site innovation to assist with a sustainable built environment.

A View of Flexible Housing in China

LI Shanshan's doctoral dissertation features a picture of Flexible Housing in the Chinese context, covering development history, current situation of typical projects, and possible application in the future. It is conducted under the assumption that the specific expressions of flexible housing are closely connected with social backgrounds, and reveals preliminarily the effectiveness of flexibility in resisting the change. The research is concentrated on, but not confined to the particular situation in China. Conversely, it also pays attention to the international counterparts. The prominent researches and practices, especially in Europe, provide an important reference for this research. Meanwhile, the achievements in Chinese context are systematically introduced. This study is assisted by three scientific tools. Firstly, it is dependent on the national and international literatures. The national literature helps it to inquire into the existing researches conducted by the Chinese scholars. The international researches provide it plenty of available references, by which the research concept was improved. Secondly, face-to-face interview, as a sociological method, is employed to obtain the first-hand material. The interviewees includes the architects who devoted themselves in this topic, the inhabitants who are accommodated by flexible housing, and other roles who are closely connected with flexible housing. Thirdly, the study gets support by the documents preserved in the Architectural Archives

An empirical analysis on the housing prices in the Pearl River Delta Economic Region of China

As the region with the fastest and highest level of economic growth in China, the instability of the Pearl River Delta Economic Region's (PRDER) housing prices has always been a social focus. In order to make housing price stabilization policies effective, more research is required about China's housing market mechanism and the influential factors of housing prices. China used to be a socialist economy since 1949. Deng Xiaoping began China's economic reform and introduced market principles in 1978. Since then China's housing had undergone transition from socialist system to market economy. After 1998, China had housing market economy. This paper aims to understand the housing price behaviour of newly transformed housing market economy of China by analysing the influential factors of China's housing prices compared to that of conventional market economy. This study established a fixed-effect model of panel data and conducts empirical analysis on the influential factors of housing prices in nine cities in the PRDER by adopting the least squares dummy variable method. Because access to China's housing markets data is extremely limited, collecting reliable and consistent housing market data at city level was the biggest challenge in this research. We successfully compiled local housing market data at city level including housing sales price index of the nine cities, number of resident (registered and non-registered-but-long-stay residents), GDP per capita, residential sales area, annual investment on housing development land purchasing cost, and so forth. The analysis confirms that China's housing market follows a market mechanism. Demand is the major driver of housing prices, housing supply tends to lower the housing prices, and land cost is positively correlated with housing prices. Since cities grow with continuing urbanization and industrialization, housing supply policy seems required to effectively stabilize the housing price.

Based on Stackelberg Differential Game of Affordable Housing Pricing Mechanism Research

Affordable housing is an important part of China's housing security system. This policy is adapted to the actual situation of our country. The core advantage of the affordable housing is prices. It is to ensure the healthy development of affordable housing and a premise for the real role. How to make affordable housing for protection of the population can not only afford but also comfortable stay, developed pricing is the most important issue of its construction, it relates to the different interests of the class, a scientific and reasonable to take into account the different interests sectors of the pricing model. It helps to achieve social stability, improve the construction, regulatory and pricing mechanisms of affordable housing, and has a theoretical and practical significance.

Based on Stackelberg Differential Game of Affordable Housing Pricing Mechanism Research

Affordable housing is an important part of China's housing security system. This policy is adapted to the actual situation of our country. The core advantage of the affordable housing is prices. It is to ensure the healthy development of affordable housing and a premise for the real role. How to make affordable housing for protection of the population can not only afford but also comfortable stay, developed pricing is the most important issue of its construction, it relates to the different interests of the class, a scientific and reasonable to take into account the different interests sectors of the pricing model. It helps to achieve social stability, improve the construction, regulatory and pricing mechanisms of affordable housing, and has a theoretical and practical significance.

The Limits and Potentials of the Housing Market Enabling Paradigm: An Evaluation of China's Housing Policies from 1998 to 2011

This paper examines the housing policies in China in the last 14 years in the context of the international debate on the World Bank's housing market enabling strategy to improve low-income housing provision in developing countries. A review of China's urban housing outcomes reveals housing price inflation and shortage of affordable housing in the fast expanding housing market. The paper analyzes policies to increase both demand for and supply of housing and argues that these policies have contributed to worsening affordability. This situation has been exacerbated by problems in the institutional framework managing the housing sector. The paper concludes that market enabling alone is not sufficient to achieve a satisfactory housing outcome for low- and middle-income groups in Chinese cities. It advocates more effective and direct public intervention for enhancing social housing provision and tightening market regulation to address both market and government failures to improve housing conditions for lower income groups.

Institutional change and state-owned enterprises in China's urban housing market

This paper analyses institutional change and its consequences on the conduct of state owned enterprises (SOEs) in China's housing sector since reforms began in 1978. Three distinct phases can be identified. In the pilot phase of 1978–1988, SOEs became producers and distributors of houses. In the second phase of 1988–1998, SOEs focused on the resale of public houses and became important contributors to the housing provident funds. In the third phase since 1998, SOEs expanded their role to become developers, investors and speculators in the housing market. The transformation of the urban housing sector from in-kind provision to market-based allocation helped turn losses made in the past to profits. The autonomy and the infusion of private modern management principles have stimulated upgrading in the construction and designing technology of houses developed by SOEs. However, as instruments of the state, SOEs still function as providers of social welfare to urban dwellers by promoting affordable housing to the poor, which shows that the state has remained central in balancing private and public interests in the housing market.