A Tale of Two Cities: How Greater Shanghai and Greater London Cope with the Housing Boom?

In the last several years both the UK and China have experienced housing booms that result in substantial price inflation and threaten the financial stability and economic sustainability in the both countries. This paper compares the causes of the housing boom in both countries and the macro and micro control measures adopted by the central and local governments to achieve a soft landing of the housing market, using Greater London and Greater Shanghai as case studies. It examines the differences in the operational mechanisms of the housing market, defined here as the set of institutional arrangements that guide policy formulation and market operation, and the impact of such differences in institutional arrangements in property rights protection, planning control, financing, agency, and specific government policies towards the housing market. The paper then examines the recent housing market trends in Greater London and Greater Shanghai and government policies to contain the overheating. It argues that macro economic control measures are more mature in the UK, whose property market has long been a free market, and are often complicated by the coordination of economic policies and political needs in China, which result in heavy government interventions. The paper explores the recent measures taken by the Shanghai government to mitigate the price inflation. Finally, the paper evaluates the effectiveness of the measures to avoid the negative fallout of the housing boom and the control measures in the two cities.