Leverage,Consumer Finance,and Housing Prices in China

In this article, we focus on the effect of household borrowing behavior on housing prices in China, under the background of rapid growth of consumer finance during the past decade. We build a micromodel to deduce the relationship between consumers’ leverage, housing enterprises’ leverage, and housing prices and use a dynamic panel model and panel error correction model to do the empirical work. The results show that the first- and second-tier cities of China are greatly influenced by leverages, the second-tier cities also by local growth, and the third-tier cities are weakly affected by leverages but greatly affected by the land prices. Further explanations and discussions of the empirical results are given accordingly.