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Investor Confidence as a Determinant of China's Urban Housing Market Dynamics |
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| Authors: | Siqi Zheng Weizeng Sun Matthew E Kahn |
| Institution: | 1. Hang Lung Center for Real Estate and Department of Construction Management, Tsinghua University, Beijing, People's Republic of China;2. Hang Lung Center for Real Estate and Department of Construction Management, Tsinghua University, Beijing 100084, People's Republic of China, Center for Real Estate, Massachusetts Institute of Technology, Cambridge, MA;3. Institute of the Environment, Department of Economics, Department of Public Policy, Anderson School of Management, UCLA School of Law, University of California‐Los Angeles, Los Angeles CA 90095 and National Bureau of Economic Research, Cambridge, MA |
| Abstract: | China's urban housing market dynamics suggest that evolving investor confidence may be a relevant demand shifter. Such investors are continually updating their beliefs about the state of the macroeconomy and the policy uncertainty related to national and local housing policies. We build a 35 Chinese city real estate confidence index that varies over time and across cities. This index predicts subsequent house price appreciation and new housing sales. We document evidence of heterogeneous effects of investor confidence depending on a city's demographics and the city's elasticity of housing supply. Our results based on a new household‐level expectations survey bolster the case that investor expectations are an important determinant of real estate price dynamics. |
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