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A Real Estate Boom with Chinese Characteristics

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  • Edward Glaeser
  • Wei Huang
  • Yueran Ma
  • Andrei Shleifer

Abstract

Chinese housing prices rose by over 10 percent per year in real terms between 2003 and 2014 and are now between two and ten times higher than the construction cost of apartments. At the same time, Chinese developers built 100 billion square feet of residential real estate. This boom has been accompanied by a large increase in the number of vacant homes, held by both developers and households. This boom may turn out to be a housing bubble followed by a crash, yet that future is far from certain. The demand for real estate in China is so strong that current prices might be sustainable, especially given the sparse alternative investments for Chinese households, so long as the level of new supply is radically curtailed. Whether that happens depends on the policies of the Chinese government, which must weigh the benefits of price stability against the costs of restricting urban growth.

Suggested Citation

  • Edward Glaeser & Wei Huang & Yueran Ma & Andrei Shleifer, 2017. "A Real Estate Boom with Chinese Characteristics," Journal of Economic Perspectives, American Economic Association, vol. 31(1), pages 93-116, Winter.
  • Handle: RePEc:aea:jecper:v:31:y:2017:i:1:p:93-116
    Note: DOI: 10.1257/jep.31.1.93
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    References listed on IDEAS

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    7. Jia, Pengfei & Lim, King Yoong, 2018. "Tax Policy and Toxic Housing Bubbles in China," MPRA Paper 86576, University Library of Munich, Germany.
    8. Zhen Tian & Chengning Zhang & Shuo Zhang, 2017. "Analytical Calculation of Magnetic Field Distribution and Stator Iron Losses for Surface-Mounted Permanent Magnet Synchronous Machines," Energies, MDPI, Open Access Journal, vol. 10(3), pages 1-12, March.
    9. Yu Zhang, 2017. "Liquidity Constraints, Transition Dynamics, and the Chinese Housing Return Premium," 2017 Meeting Papers 1217, Society for Economic Dynamics.
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    12. Shu-gang Li & Hai-qing Shuang & Hong-sheng Wang & Ki-Il Song & Lang Liu, 2017. "Extraction of Pressurized Gas in Low Air-Conductivity Coal Seam Using Drainage Roadway," Sustainability, MDPI, Open Access Journal, vol. 9(2), pages 1-11, February.
    13. Song, Zheng (Michael) & Xiong, Wei, 2018. "Risks in China’s financial system," BOFIT Discussion Papers 1/2018, Bank of Finland, Institute for Economies in Transition.
    14. repec:cuf:journl:y:2017:v:18:i:1:dinghuang is not listed on IDEAS
    15. Dieppe, Alistair & Gilhooly, Robert & Han, Jenny & Korhonen, Iikka & Lodge, David, 2018. "The transition of China to sustainable growth – implications for the global economy and the euro area," Occasional Paper Series 206, European Central Bank.
    16. Yongheng Deng & Eric Girardin & Roselyne Joyeux & Shuping Shi, 2017. "Did bubbles migrate from the stock to the housing market in China between 2005 and 2010?," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 276-292, August.
    17. Cao, Xiaping & Huang, Bihong & Lai, Rose Neng, 2018. "The Impact of Exogenous Demand Shock on the Housing Market: Evidence from the Home Purchase Restriction Policy in the People’s Republic of China," ADBI Working Papers 824, Asian Development Bank Institute.
    18. Cheng, Dong & Tan, Yong & Yu, Jian, 2017. "Credit Rationing and Firm Exports: Micro Evidence from SMEs in China," MPRA Paper 81914, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • P25 - Economic Systems - - Socialist Systems and Transition Economies - - - Urban, Rural, and Regional Economics
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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