Urban Housing Markets in China

Abstract: This thesis focuses on problems of prices and risks in the housing markets of urban China. What drives the dynamics of housing prices across regions is not only of great interest for academic researchers but also of first importance for policy makers. It is also interesting to pay attention to the issue of housing bubbles at a city level and risk allocations from an institutional view. To address the issues, the thesis applies both qualitative and econometric approaches in analyzing the urban housing markets of China. The first paper reviews articles mainly published in Chinese core journals. The existing studies are mainly concerned with such six topics as institutions, policy, land, finance, price and market. The first three topics involve the public housing allocation system reform, such fiscal and monetary tools as tax and interest rate, and the land reserve system. The housing finance treats such subjects of mortgages, bubbles and financial systems, while housing prices explore factors such as land prices, construction cost and exogenous forces like income. Finally, the housing market addresses housing circles and the relationship between housing demand and supply.In paper 2, the housing price dynamics is investigated at a national level and across regions by using the panel data with 30 provinces over 7 years (2001-2007). The empirical results suggest that the estimates for the fundamentals of income, user cost, housing stock and employment are robust at a national level, implying that there exists a stationary equilibrium relation in the long run between the housing price and the fundamentals above. The speed of price adjustment varies considerably across regions in the East, Midland and West.Then the housing markets in Beijing and Shanghai are examined in Paper 3 to quantify possible existence of a bubble in the two metropolitan areas. This article uses an integrated strategy involved with such fundamentals as interest rates, rent, income and GDP. The results show that Beijing might have been on the way of forming a housing price bubble between 2005 and 2008, and that there possibly existed a bubble in Shanghai from 2003 to 2004.By comparing the risk allocation in China with that in Sweden, Paper 4 explores the difference of actual risks taken by various actors. The banks and governments appear to take more risks in China, especially as the Chinese developers have a weaker financial situation than in Sweden. Households have more choices to reduce the risk by purchasing various kinds of insurance products and also by binding the interest rate.