Does Rising House Price Push Chinese Households to “Leverage Up” More?: —A Study from the Perspective of Heterogeneity of House-Buying Motivation

The rapid rise of leverage in Chinese household sector in recent years has attracted considerable attention, and high housing prices might be the main reason for the phenomenon. Do different house-buying motivations of households give an impetus to it? Researching this problem is of great importance to understand mechanisms for the formation of household leverage and taking targeted housing policies. Theoretical analysis in this paper finds that if house-buying motivation that was speculative was quite obvious, rising housing prices would result in the leverage of non-first-house (NFH) households outpacing that of first-house (FH) households. On this basis, we conducted empirical analysis with a state-owned bank’s all housing mortgage loan data on 70 large and medium-sized cities for 2016 and the IV (instrumental variables) and DID (differences-in-differences) methods, and compared the two types of households from the inter-city and intra-city dimensions. The result showed that rising housing prices indeed drive up the debt balance and leverage of NFH households significantly more than those of FH households. Furthermore, our research found that a rise in housing prices has prompted NFH households to be more inclined to make the most use of mortgage policies with no substantial housing difference. To curb excessive leverage increase in the household sector, therefore, apart from regulating high expectations of housing prices, there should be stepped-up credit constraints on NFH households, thus restricting their behavior of excessive speculation.