Author: Lu, Wanying
Title: Urban leverage, purchase restriction and housing price in China
Advisors: Shen, Jeff (BRE)
Degree: M.Sc.
Year: 2022
Subject: Housing -- Prices -- China
Real property -- Prices -- China
Real property -- Government policy -- China
Real estate investment -- Finance
Hong Kong Polytechnic University -- Dissertations
Department: Department of Building and Real Estate
Pages: 81 pages : color illustrations
Language: English
Abstract: Leverage in housing market have increased rapidly and thus received great concerns in recent years in China. Though existing papers hold various opinions on the relationship between housing prices and leverage ratios, most of them focus on how they influence each other directly from the perspective of market rules. Many papers, especially those who affirm leverage's positive impact on housing prices argue that higher leverage means more money flowing into the market, rising the housing prices. And higher housing prices will increase demand for mortgage loan, driving up the leverage level. However, little papers discussed leverage's indirect impact on housing prices. For example, urban leverage level may affect the government's attitude towards housing market. And governments in different cities will response differently to high urban leverage and commit different measures to regulate the market. This will interfere with market rules and contribute to the heterogeneity of leverage's impact on housing prices. As a significant indicator for financial risk, it is essential to explore how urban leverage influences housing prices indirectly and heterogeneously. This paper aims to explore the depressing effect of urban leverage on housing prices in China and investigate whether housing purchase restrictions could affect the relationship between urban leverage and housing price.
Using a panel data of 96 Chinese cities for the period from 2003 to 2019, this paper obtains three main findings. First, this paper finds that urban leverage has depressing effect on housing prices. Second, the first round of purchase restriction policies in 2010 had no significant impact on housing prices and the second round of purchase restriction policies exerted significantly positive impact on housing prices. Third, urban leverage's depressing effect on housing prices is strengthened in cities with purchase restriction policies. And the second round of purchase restriction policies can amplify such depressing effect more significantly than the first round.
On one hand, urban leverage exerts depressing effect on housing prices by influencing the government's attitude toward housing market. When urban leverage is high, the government will tighten loan policies and reduce credit supply to housing market, suppressing housing prices in popular cities. In third- and forth-tier cities, the governments are relatively less vigilant to high urban leverage. This has contributed to the heterogeneity of urban leverage's impact. On the other hand, urban leverage's depressing effect is stronger during the purchase restriction periods because the government is warier of high leverage in cities with purchase restriction and the purchase restriction policies can strengthen such depressing effect on housing prices.
Rights: All rights reserved
Access: restricted access

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