Housing Bubble and Government Regulation: Evidence from China

Narodowy Bank Polski Workshop: Recent Trends in the Real Estate Market and Its Analysis (2015 Edition)

NBP Working Paper No. 243, Volume 2

63 Pages Posted: 23 Sep 2016

See all articles by Jerry Cao

Jerry Cao

Independent

Bihong Huang

University of Macau - Department of Finance and Business Economics

Rose Neng Lai

University of Macau

Date Written: August 9, 2016

Abstract

Facing rampant real estate price surge, Chinese government imposed the home purchase restriction policy to dampen the speculation activity in major cities in 2010. Using a comprehensive dataset covering the real estate markets across various cities, we find that the policy triggered substantial decline in the property price and transaction volume. Cities having higher reliance on real estate sector for fiscal revenue and economic growth experienced greater drop in housing prices following the policy implementation. However, the policy had no measurable effects on the construction boom, hinting the limitation of the policy to correct the housing bubble. These evidences are robust to endogeneity concerns addressed by both two-step difference-in-difference approach and endogeneous treatment effects regressions.

Keywords: Home Purchase Restriction Policy, Housing Bubble, China, Difference In

JEL Classification: G12, G18, H83

Suggested Citation

Cao, Jerry and Huang, Bihong and Lai, Rose Neng, Housing Bubble and Government Regulation: Evidence from China (August 9, 2016). Narodowy Bank Polski Workshop: Recent Trends in the Real Estate Market and Its Analysis (2015 Edition) ; NBP Working Paper No. 243, Volume 2. Available at SSRN: https://ssrn.com/abstract=2841655

Jerry Cao (Contact Author)

Independent

No Address Available

Bihong Huang

University of Macau - Department of Finance and Business Economics ( email )

Macau

Rose Neng Lai

University of Macau ( email )

Av. Da Universidade, Taipa
Macau, Nil
Macau

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