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Demystifying the Chinese housing boom

Author(s): Fang, H; Gu, Q; Xiong, Wei; Zhou, LA

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Abstract: © 2016 by the National Bureau of Economic Research. All rights reserved. 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%. 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.
Publication Date: 2016
Citation: Fang, H, Gu, Q, Xiong, W, Zhou, LA. (2016). Demystifying the Chinese housing boom. NBER Macroeconomics Annual, 30 (1), 105 - 166. doi:10.1086/685953
DOI: doi:10.1086/685953
ISSN: 0889-3365
EISSN: 1537-2642
Pages: 105 - 166
Type of Material: Journal Article
Journal/Proceeding Title: NBER Macroeconomics Annual
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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