Investor Confidence as a Determinant of China's Urban Housing Market Dynamics

32 Pages Posted: 13 Oct 2016

See all articles by Siqi Zheng

Siqi Zheng

Hang Lung Center for Real Estate, Tsinghua University

Weizeng Sun

Tsinghua University

Matthew E. Kahn

University of Southern California; National Bureau of Economic Research (NBER)

Date Written: Winter 2016

Abstract

China's urban housing market dynamics suggest that evolving investor confidence may be a relevant demand shifter. Such investors are continually updating their beliefs about the state of the macroeconomy and the policy uncertainty related to national and local housing policies. We build a 35 Chinese city real estate confidence index that varies over time and across cities. This index predicts subsequent house price appreciation and new housing sales. We document evidence of heterogeneous effects of investor confidence depending on a city's demographics and the city's elasticity of housing supply. Our results based on a new household‐level expectations survey bolster the case that investor expectations are an important determinant of real estate price dynamics.

Suggested Citation

Zheng, Siqi and Sun, Weizeng and Kahn, Matthew E., Investor Confidence as a Determinant of China's Urban Housing Market Dynamics (Winter 2016). Real Estate Economics, Vol. 44, Issue 4, pp. 814-845, 2016. Available at SSRN: https://ssrn.com/abstract=2851642 or http://dx.doi.org/10.1111/1540-6229.12119

Siqi Zheng (Contact Author)

Hang Lung Center for Real Estate, Tsinghua University ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://www.siqizheng.cn

Weizeng Sun

Tsinghua University ( email )

No Address Available

Matthew E. Kahn

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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