Demystifying the Chinese Housing Boom

Hanming Fang, Quanlin Gu, Wei Xiong, Li‐An Zhou

Chapter in NBER book NBER Macroeconomics Annual 2015, Volume 30 (2016), Martin Eichenbaum and Jonathan Parker, editors (p. 105 - 166)
Conference held April 17-18, 2015
Published in June 2016 by University of Chicago Press
© 2016 by the National Bureau of Economic Research
in NBER Book Series NBER Macroeconomics Annual

We construct housing price indices for 120 major cities in China in 2003-2013 based on sequential sales of new homes within the same housing developments. By using these indices and detailed information on mortgage borrowers across these cities, we find enormous housing price appreciation during the decade, which was accompanied by equally impressive growth in household income, except in a few first-tier cities. While bottom-income mortgage borrowers endured severe financial burdens by using price-to-income ratios over eight to buy homes, their participation in the housing market remained steady and their mortgage loans were protected by down payments commonly in excess of 35 percent. As such, the housing market is unlikely to trigger an imminent financial crisis in China, even though it may crash with a sudden stop in the Chinese economy and act as an amplifier of the initial shock.

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This chapter first appeared as NBER working paper w21112, Demystifying the Chinese Housing Boom, Hanming Fang, Quanlin Gu, Wei Xiong, Li-An Zhou
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