## IMF Survey : Experts Confer on State of China’s Housing Market

_IMF News, January 29, 2016_

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## Bibliographic details
- Published: January 29, 2016

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### Overview
- Conference: International Symposium on Housing and Financial Stability in China, organized by the IMF in cooperation with the Chinese University of Hong Kong, Shenzhen and Princeton University; held in Shenzhen.
- Publication date: January 29, 2016.
- Purpose: Spotlighted new data sets on China’s housing markets as part of the Global Housing Watch initiative and IMF enhanced surveillance of global housing markets.

### Demand–Supply Imbalances
- National trend masks large city-level variation in house price movements.
- Residential land price index for 35 large cities (based on government sales of land to private developers) findings:
  - Prices increased in inflation-adjusted terms by about 80 percent a year in Beijing over the past decade.
  - Prices increased by only 10 percent a year in Xian over the past decade.
- Gyourko’s estimates of balance between housing supply and demand in the 35 cities:
  - In 20 percent of the cities (including Beijing, Hangzhou, Shanghai, Shenzhen) supply remains “below our projected demand.”
  - In 40 percent of the cities (including Xian) supply is “at least 30 percent above projected demand.”
  - The remaining 40 percent of cities are “modestly over-supplied.”

### Housing Demand and Incomes; Financial Soundness of Homeowners
- Data source: comprehensive mortgage-loan data set from 2003 to 2013 from a major bank.
- Positive indicators:
  - Household disposable income has grown annually by 9 percent for a decade.
  - Homeowners put a down payment of over 30 percent on mortgage loans.
- Affordability and risk metrics:
  - House price-to-income ratio is around eight in smaller cities.
  - House price-to-income ratio is greater than ten in the largest cities.
  - High ratios imply that small adverse changes in income growth profiles for low-income households could impair mortgage repayment ability.
- Comparative risk note:
  - U.S. experience: “expectations that house prices could never fall” was a fatal flaw.
  - China-specific risk: “markets having irrational expectations of short-run income growth.”

### Links between Housing Market and Local Government Debt
- Institutional constraint: local Chinese governments are prevented from directly issuing debt to fund mandated capital projects.
- Funding mechanism: local governments sell public land to raise funding; future land sales revenue is committed to repay local government debt.
- Collateral practice: land parcels are the most widely-used collateral for local government debt.
- Risk implication: “a substantial drop in housing or land prices may increase the risk level of local government debt.”

### Policy Implications and Long-Run Perspectives
- Short-term risks exist, but should be weighed against China’s long-run rebalancing goals.
- Post-global financial crisis growth: “relied heavily on credit and investment, particularly real estate investment.”
- Rebalancing aim: shift toward growth that is more sustainable.
- Urban development strategy question:
  - Whether China should follow a European/Japanese model of a few large-population cities or develop more megacities dispersed across the country.
  - Preference expressed for developing more megacities to relieve pressure on housing and other amenities in big cities.

### Conference Context and Global Monitoring
- The Shenzhen conference was the fourth in a Global Housing Watch conference series:
  - First two conferences focused on housing markets in advanced economies (Dallas and Frankfurt).
  - Third conference, in Bangalore, expanded coverage to emerging markets.
- Messaging: enhanced surveillance of housing markets reflects the view that the “era of benign neglect of house price booms is over.”

*Source: IMF Survey : Experts Confer on State of China’s Housing Market, January 29, 2016.*

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## Content in this bundle

- [Session202hfangpdf (PDF)](/-/media/websites/imf/imported/external/np/seminars/eng/2015/housingchina/pdf/_session202hfangpdf.pdf){rel="external" type="application/pdf"}
- [Session202jgyourkopdf (PDF)](/-/media/websites/imf/imported/external/np/seminars/eng/2015/housingchina/pdf/_session202jgyourkopdf.pdf){rel="external" type="application/pdf"}
- [Session203ydengpdf (PDF)](/-/media/websites/imf/imported/external/np/seminars/eng/2015/housingchina/pdf/_session203ydengpdf.pdf){rel="external" type="application/pdf"}
- [Session2hhuangpdf (PDF)](/-/media/websites/imf/imported/external/np/seminars/eng/2015/housingchina/pdf/_session2hhuangpdf.pdf){rel="external" type="application/pdf"}
- [Session3rkosspdf (PDF)](/-/media/websites/imf/imported/external/np/seminars/eng/2015/housingchina/pdf/_session3rkosspdf.pdf){rel="external" type="application/pdf"}
- [0116pdf (PDF)](/-/media/websites/imf/imported/external/research/housing/report/pdf/_0116pdf.pdf){rel="external" type="application/pdf"}

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Research](https://www.imf.org/en/news/search)
- [Conference on housing and financial stability](http://www.imf.org/external/np/seminars/eng/2015/housingchina/)
- [Min Zhu Speech on housing markets](http://www.imf.org/external/np/speeches/2014/060514.htm)
- [Blog: Era of Benign Neglect of House Price Booms is Over](http://blog-imfdirect.imf.org/2014/06/11/era-of-benign-neglect-of-house-price-booms-is-over/)
- [Global housing watch throws spotlight on booms and busts](http://www.imf.org/external/pubs/ft/survey/so/2014/NEW061114A.htm)
- [conference](http://www.imf.org/external/np/seminars/eng/2015/HousingChina/index.htm)
- [Global Housing Watch](http://www.imf.org/external/research/housing/index.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sores012916a_