The user cost of housing and the price-rent ratio in Shanghai

Jie Chen, Yu Chen, Robert Hill () and Pei Hu

Regional Science and Urban Economics, 2022, vol. 92, issue C

Abstract: We compute hedonic quality-adjusted price-rent ratios for residential housing in Shanghai. Our method corrects for selection into owner-occupied housing and for omitted variables. We find that quality adjustment reduces the price-rent ratio by 14 percent. Even so, a price-rent ratio of 70 in 2017 is still very high by international standards. In cross-section, the price-rent ratio is increasing in price, confirming previous findings for cities in western countries. But it is decreasing in rents. We attribute this new finding to the asymmetric impact of the hukou system on owner-occupiers and renters in China. We then examine, in a user-cost setting, why the price-rent ratio is so high. The key driver is the extremely high rate of expected capital gains, which we argue has turned the user cost of owner-occupying negative. We explore how this affects the interpretation of observed price-rent ratios.

Keywords: Shanghai housing market; Price–rent ratio; User cost; Hedonic quality adjustment; Capital gains (search for similar items in EconPapers)
JEL-codes: C43 E01 E31 R31 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0166046221000983
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The User Cost of Housing and the Price-Rent Ratio in Shanghai (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:92:y:2022:i:c:s0166046221000983

DOI: 10.1016/j.regsciurbeco.2021.103738

Access Statistics for this article

Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou

More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().