Real Estate Market Policy and Household Demand for Housing

Yuan Cheng (), John K. Dagsvik and Xuehui Han

Pacific Economic Review, 2014, vol. 19, issue 2, 237-253

Abstract: This paper used an estimated mixed multinomial logit model of household housing demand to examine the impact of four housing market-related policies on a stated preference survey sample. The estimated demand probability function suggested that household choice behaviour does show huge heterogeneity. The estimated results were then employed to examine the effects of the policies. We estimated the potential disequilibrium between demand and supply under the construction-size-limitation policy, demonstrated that the efficient movers' subsidy increases along with the household income, and simulated the changes in housing demand when tax policy is changed. We demonstrate the potential usefulness of our modelling framework in assisting policy-making decisions. Our model also partially explains the failures and controversies of the latest real-estate intervention policies in China.

Date: 2014
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