The Housing Market Effects of Local Home Purchase Restrictions: Evidence Form Beijing

Posted: 6 Nov 2017

See all articles by Weizeng Sun

Weizeng Sun

Tsinghua University

Siqi Zheng

Hang Lung Center for Real Estate, Tsinghua University

David Geltner

Massachusetts Institute of Technology (MIT); MIT Center for Real Estate

Rui Wang

University of California, Los Angeles (UCLA)

Date Written: October 10, 2017

Abstract

Home prices have surged in major Chinese cities, leading to concerns of asset price bubbles and housing affordability. The policy of home purchase restrictions (HPR) has been one of China's harshest housing market interventions to squeeze out speculative demand and dampen the soaring home prices. Beijing was the first city to implement the HPR. Employing the regression discontinuity design technique, we find that Beijing's HPR policy triggered a 17-24% decrease in resale price, a drop in the price-to-rent ratio of about a quarter of its mean value, and a deep (1/2 to 3/4) reduction in the transaction volume of the for-sale market, with no significant change in the rent or the transaction volume of rental units. In submarkets where housing supply was less elastic, the effect of the HPR were larger in price and smaller in quantity, suggesting that wealthy buyers likely benefited more from the HPR. The scope of the analysis does not allow conclusions regarding the persistence or longevity of these effects.

Keywords: Home purchase restriction; Housing market; Chinese housing policy; Beijing

Suggested Citation

Sun, Weizeng and Zheng, Siqi and Geltner, David and Wang, Rui, The Housing Market Effects of Local Home Purchase Restrictions: Evidence Form Beijing (October 10, 2017). Journal of Real Estate Finance and Economics, Vol. 55, No. 3, 2017. Available at SSRN: https://ssrn.com/abstract=3050590

Weizeng Sun

Tsinghua University ( email )

No Address Available

Siqi Zheng

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

HeShanHeng Building
Beijing, 100084
China

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

David Geltner

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

MIT Center for Real Estate ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

Rui Wang (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

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