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Home purchase restriction and housing price: A distribution dynamics analysis

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  • Li, Victor Jing
  • Cheng, Andy Wui Wing
  • Cheong, Tsun Se

Abstract

China's residential housing market has been largely influenced by the policy initiatives of the central government. This study examines how the implementation and removal of home purchase restrictions has affected housing price changes in major cities. Based on the dataset of 70 large- and medium- sized cities between 2014 and 2015, the price evolution trends were evaluated by the distribution dynamic analysis based on the method of Mobility Probability Plot (MPP). This newly developed method allows for better exploring housing price dynamics under home purchase restriction policy. There are four major findings: First, home purchase restriction has a salient effect on curbing speculative investment demand in terms of lowering large sized housing price growth; second, home purchase restriction has long-running effects on bringing down housing prices if the current price increase does not exceed 5% on a month-to-month basis; third, small- or large-sized housing may face more downward pressure of housing prices than medium-sized housing under the home purchase restriction; fourth, removal of the home purchase restriction may saliently increase the housing price levels that have been contained.

Suggested Citation

  • Li, Victor Jing & Cheng, Andy Wui Wing & Cheong, Tsun Se, 2017. "Home purchase restriction and housing price: A distribution dynamics analysis," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 1-10.
    • Handle: RePEc:eee:regeco:v:67:y:2017:i:c:p:1-10
    DOI: 10.1016/j.regsciurbeco.2017.08.002
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    Cited by:

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    3. Bing Lu & Xiaofen Tan & Jinhui Zhang, 2019. "The crowding out effect of booming real estate markets on corporate TFP: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(5), pages 1319-1345, March.
    4. He Gao & Walter Timo de Vries & Minrui Zheng & Jianping Ye, 2023. "State Capacity to Influence Actor Relations within the Chinese Real Estate Market: An Analytical Framework," Land, MDPI, vol. 12(8), pages 1-18, August.
    5. Tan, Jing & Xu, Hao & Yu, Jingwen, 2022. "The effect of homeownership on migrant household savings: Evidence from the removal of home purchase restrictions in China," Economic Modelling, Elsevier, vol. 106(C).
    6. Zheng, Xian & Chen, Xingtao & Yuan, Ziqing, 2021. "Exploring the spatial spillover effect of home purchase restrictions on residential land prices based on the difference-in-differences approach: Evidence from 195 Chinese cities," Land Use Policy, Elsevier, vol. 102(C).
    7. Zhao, Renjie & Zhang, Jiakai, 2022. "Rent-tax substitution and its impact on firms: Evidence from housing purchase limits policy in China," Regional Science and Urban Economics, Elsevier, vol. 96(C).
    8. James Alm & Weizheng Lai & Xun Li, 2022. "Housing market regulations and strategic divorce propensity in China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(3), pages 1103-1131, July.
    9. Cheong, Tsun Se & Li, Victor Jing & Shi, Xunpeng, 2019. "Regional disparity and convergence of electricity consumption in China: A distribution dynamics approach," China Economic Review, Elsevier, vol. 58(C).
    10. Huang, Naqun & Yang, Zhenlin, 2021. "Spatial dynamic models with short panels: Evaluating the impact of purchase restrictions on housing prices," Economic Modelling, Elsevier, vol. 103(C).
    11. Ikenna Stephen Ezennia & Sebnem Onal Hoskara, 2019. "Methodological weaknesses in the measurement approaches and concept of housing affordability used in housing research: A qualitative study," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-27, August.
    12. Shao, Xiaokuai & White, Alexander, 2021. "Outsiders, insiders and interventions in the housing market," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 110-134.
    13. Chen, Xin & Qin, Yaohua & Xiao, He & Zhang, Yifei, 2019. "Microfinancing and Home-purchase Restrictions: Evidence from the Online “Peer-to-Peer” Lending in China," MPRA Paper 95375, University Library of Munich, Germany.
    14. Chen, Jie & Chen, Yu & Hill, Robert J. & Hu, Pei, 2022. "The user cost of housing and the price-rent ratio in Shanghai," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    15. Shi, Song & Zhang, Hong & Zhang, Jun, 2022. "The impact of a home purchase restrictions (HPR) policy on the distressed property market in Beijing," Journal of Housing Economics, Elsevier, vol. 58(PB).
    16. Zhou, Qian & Shao, Qinglong & Zhang, Xiaoling & Chen, Jie, 2020. "Do housing prices promote total factor productivity? Evidence from spatial panel data models in explaining the mediating role of population density," Land Use Policy, Elsevier, vol. 91(C).
    17. Li, Keyang & Qin, Yu & Wu, Jing, 2020. "Recent housing affordability in urban China: A comprehensive overview," China Economic Review, Elsevier, vol. 59(C).
    18. Taiyi Zang & Hongmei Gu, 2023. "State-Space Modeling of Housing Sentiment for Regressing Changes of Real Estate Prices Following Short-Term Control Policy in China," Sustainability, MDPI, vol. 15(16), pages 1-19, August.

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    More about this item

    Keywords

    Housing purchase restriction; Housing price; Distribution dynamics; China;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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