The housing sector in China : Market formation and supply

Abstract

This study bridges the knowledge gap on Chinaa??s housing market by providing an understanding on this market, focusing on housing supply. First, a framework is established to examine the evolution of the housing market in China during the economya??s transition from a central-planned system to a market-oriented one Then, a cross-city model based on the study of Mayer and Somerville (2000) is designed to estimate new housing supply in China. Finally, the source of differences in supply elasticities across cities is explored through a simple cross-sectional model. The empirical results indicate that both the economic development level of a city and the city size have strong positive effects on new housing supply while housing construction is insensitive to housing price changes. The results also suggest regional disparity in Chinaa??s housing and a negative relationship between land use regulation and supply elasticity.