From premium to discount: A quasi-natural experiment in Shanghai's judicial auction housing market

Nanyang Bu, Wen Shen and Xiangyu Guo

Finance Research Letters, 2025, vol. 77, issue C

Abstract: This study investigates the impact of Home Purchase Restrictions (HPR) on housing prices by exploiting a quasi-natural experiment in Shanghai's judicial auction housing market. While previous studies of HPR policies face challenges from non-random treatment assignment and spatial heterogeneity between treatment and control groups, our research design circumvents these challenges by leveraging the extension of HPR to previously exempt judicial auction properties on January 24, 2021. Using a difference-in-differences approach, we document a novel phenomenon: judicial auction properties commanded a premium over resale properties before the HPR extension, despite the typical discount found in foreclosed property markets worldwide. This premium suggests buyers used auctions to circumvent purchase restrictions, indicating substitution between the two markets. After the policy change, auction properties reverted to selling at a discount, with prices declining by 16.2% relative to the resale market.

Keywords: Home purchase restriction; Chinese housing market; Judicial auction housing market; Housing demand; Real estate market (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325003228

DOI: 10.1016/j.frl.2025.107058

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