Impact of government intervention in the housing market: evidence from the housing purchase restriction policy in China
Yi Wu and
Applied Economics, 2018, vol. 50, issue 6, 691-705
In 2010, a housing purchase restriction policy was announced by Chinaâ€™s central government and implemented gradually by several prefecture governments. In this article, we empirically investigate this policyâ€™s effect on the housing market. Using a difference-in-difference framework, we show that the housing purchase restriction policy reduces housing prices and transaction amounts but does not influence the housing investment or construction markets. Moreover, upstream industry suffers more than downstream industry. The results are robust to a battery of robustness checks. Heterogeneity exists across cities. We find that first- and second-tier cities as well as highly urbanized cities experience great declines in housing prices after the policyâ€™s implementation, especially cites that had high housing prices in 2010 and cities with high real estate investment as a proportion of fixed asset investment. However, the housing policy is less effective in curbing speculative demand.
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