Assessing China’s Residential Real Estate Market

Author/Editor:

Ding Ding ; Xiaoyu Huang ; Tao Jin ; W. Raphael Lam

Publication Date:

November 16, 2017

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

China’s real estate market rebounded sharply after a temporary slowdown in 2014-2015. This 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. 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, which would weaken growth, undermine financial stability, reduce local government spending room, and spur capital outflows. Empirical analysis suggests that the increasing intensity of macroprudential policies tailored to local conditions is appropriate. The government should expand its toolkit to include additional macroprudential measures and push forward reforms to address the fundamental imbalances in the residential housing market.

Series:

Working Paper No. 17/248

Subject:

English

Publication Date:

November 16, 2017

ISBN/ISSN:

9781484324813/1018-5941

Stock No:

WPIEA2017248

Format:

Paper

Pages:

26

Please address any questions about this title to publications@imf.org