Demystifying the Chinese Housing Boom

74 Pages Posted: 27 Apr 2015 Last revised: 7 May 2015

See all articles by Hanming Fang

Hanming Fang

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Quanlin Gu

Peking University

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Li-An Zhou

Peking University - Guanghua School of Management

Date Written: April 2015

Abstract

We construct housing price indices for 120 major cities in China in 2003-2013 based on sequential sales of new homes within the same housing developments. By using these indices and detailed information on mortgage borrowers across these cities, we find enormous housing price appreciation during the decade, which was accompanied by equally impressive growth in household income, except in a few first-tier cities. While bottom-income mortgage borrowers endured severe financial burdens by using price-to-income ratios over eight to buy homes, their participation in the housing market remained steady and their mortgage loans were protected by down payments commonly in excess of 35 percent. As such, the housing market is unlikely to trigger an imminent financial crisis in China, even though it may crash with a sudden stop in the Chinese economy and act as an amplifier of the initial shock.

Suggested Citation

Fang, Hanming and Gu, Quanlin and Xiong, Wei and Zhou, Li-An, Demystifying the Chinese Housing Boom (April 2015). NBER Working Paper No. w21112. Available at SSRN: https://ssrn.com/abstract=2599378

Hanming Fang (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Quanlin Gu

Peking University ( email )

Wei Xiong

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Li-An Zhou

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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