The Residential Real Estate Market in China: Assessment and Policy Implications

Ding Ding, Xiaoyu Huang (), Tao Jin () and Waikei Lam
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Xiaoyu Huang: PBC School of Finance, Tsinghua University
Waikei Lam: International Monetary Fund

Annals of Economics and Finance, 2017, vol. 18, issue 2, 411-442

Abstract: China's real estate market rebounded sharply after a temporary slowdown in 2014-2015. This paper uses city-level data to estimate the range of house price overvaluation across city-tiers and assesses the main risks of a sharp housing market slowdown. If house prices rise further beyond "fundamental" levels and the bubble expands to smaller cities, it would increase the likelihood and costs of a sharp correction, which would weaken growth, undermine financial stability, reduce local government spending room, and spur capital outflows. Empirical analysis suggests that the increasing intensity of macroprudential policies tailored to local conditions is appropriate. The government should expand its toolkit to include additional macro-prudential measures and push forward reforms to address the fundamental imbalances in the residential housing market.

Keywords: China real estate market; Housing bubbles; Macro-prudential policy (search for similar items in EconPapers)
JEL-codes: C11 C32 E43 E52 E58 F32 R31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2017:v:18:i:2:ding:huang

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