Haste or Waste? The Role of Presale in Residential Housing

Ziyang Chen, Maggie Rong Hu, Ginger Zhe Jin and Qiyao Zhou

No 32013, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides the first theoretical framework and empirical evidence on the impact of housing presale policies on unfinished buildings and developer behavior. We start with constructing a novel dataset of unfinished projects, presale policies, and land auction outcomes across 270 major cities in mainland China. We then identify 2,330 unfinished residential projects from 2010 to 2017 on a government-run citizen complaint portal. We find that both presale criterion (specifying when developers can initiate presale) and post-sale supervision of construction fund utilization relate to a lower probability of unfinished projects. However, only presale criterion relates negatively to the pace of new housing development, measured by developers’ multitasking, annual new construction area, and land auction outcomes. A back-of-the-envelope estimation suggests that the current bundle of presale policies in our sampled cities is inferior to the Pareto frontier. By increasing the postsale supervision by 2 standard deviations, the occurrence of unfinished projects could be reduced by 58% without affecting the pace of housing development. Eliminating unfinished projects entirely would entail substantial tightening of both presale criteria and postsale supervision, which would likely slow the pace of housing development. Our findings are relevant to other developing economies where unfinished buildings are common due to insufficient government oversights.

JEL-codes: D22 D82 H7 K23 L52 L78 (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-cna, nep-ppm and nep-ure
Note: IO
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32013.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
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:nbr:nberwo:32013

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32013
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().