Assessing China’s Residential Real Estate Market

IMF Working Papers, November 16, 2017

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Assessing China’s Residential Real Estate Market

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Bibliographic details

• Authors: Ding Ding, Xiaoyu Huang, Tao Jin, Waikei R Lam
• Published: November 16, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484324813.001

Overview and main finding

• China’s real estate market rebounded sharply after a temporary slowdown in 2014-2015.
• The paper uses city-level data to estimate the range of house price overvaluation across city-tiers and assesses the main risks of a sharp housing market slowdown.
• Central caution: If house prices rise further beyond “fundamental” levels and the bubble expands to smaller cities, it would increase the likelihood and costs of a sharp correction.

Risks and potential macroeconomic effects

• A sharp correction would:
  • Weaken growth.
  • Undermine financial stability.
  • Reduce local government spending room.
  • Spur capital outflows.
• Expansion of the bubble into smaller cities raises both likelihood and costs of a correction.

Empirical analysis and policy implications

• Empirical analysis suggests that the increasing intensity of macroprudential policies tailored to local conditions is appropriate.
• Recommended policy actions:
  • Expand the government’s macroprudential toolkit to include additional measures.
  • Push forward reforms to address the fundamental imbalances in the residential housing market.

Subjects and keywords (as listed)

• Subjects: Bank credit, Financial institutions, Housing, Housing prices, Money, Mortgages, National accounts, Prices, Real estate prices
• Keywords: Asia and Pacific, asset price risk, Bank credit, China real estate market, down payment, down payment ratio, Housing, housing bubbles, housing market, Housing prices, inventory ratio, land sale, land sales volume, macroprudential policy, mortgage lending, Mortgages, price correction, price decline, price rise, real estate, Real estate prices, Redidential house price, WP

Content in this bundle

• Assessing China’s Residential Real Estate Market, WP/17/248, November 2017
  • Assessing China’s Residential Real Estate Market, WP/17/248, November 2017 (Markdown version)
  • Assessing China’s Residential Real Estate Market, WP/17/248, November 2017 (PDF)