A Real Estate Boom with Chinese Characteristics

36 Pages Posted: 31 Oct 2016

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Wei Huang

Harvard University - Department of Economics; NBER; IZA Institute of Labor Economics

Yueran Ma

University of Chicago - Booth School of Business

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: October 2016

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

Glaeser, Edward L. and Huang, Wei and Ma, Yueran and Shleifer, Andrei, A Real Estate Boom with Chinese Characteristics (October 2016). NBER Working Paper No. w22789. Available at SSRN: https://ssrn.com/abstract=2861721

Edward L. Glaeser (Contact Author)

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Wei Huang

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Yueran Ma

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Andrei Shleifer

Harvard University - Department of Economics ( email )

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