Chinese Housing Markets
Paper Session
Sunday, Jan. 8, 2017 3:15 PM – 5:15 PM
Sheraton Grand Chicago, Huron
- Chair: Jing Wu, Tsinghua University
China's Political Cycle and China Buyers in Singapore Property Market
Abstract
To secure wealth is a key motivation of allocating assets overseas. The political leadership transition occurs in China every five years. The shift of leadership brings huge uncertainty to China's society, especially wealthy people. With the private residential property transaction data in Singapore, this paper shows that the number of transactions by China mainland buyers increases by half during China's political transitions, comparing with that by Singapore local, Malaysia, US and Hong Kong buyers.What Motivates the Developer to Sell Before Completion?
Abstract
Presale or selling before completion is a very common phenomenon in the housing market. However, not all developers presell their units and that the proportion of units presold varies over time and across projects. This study examines the factors that affect developer’s decision to presell their units. Based on housing transaction records in more than one thousand projects in Hong Kong, we found that presale is used as a tool to hedge against future price fluctuation so as to reduce the risk (volatility) of the performance of the developer’s real estate development portfolio. However, the effectiveness of presale as a future hedging strategy varies with the size of the development portfolio held by the companies and the companies with a larger development portfolio have higher tendency to presell. When the flexibility of presale is constrained, its effectiveness also declined and thus less incentive for the developer to presell. Another reason for the developer to presell is to exploit its information advantage over the potential buyers that cannot inspect the completed property. Contrary to industry wisdom, presale is not an important source of financing, at least not for listed developers. Developer’s decision to presell is also not conditioned on the historical price trend which home buyers relied on. These results are robust across different model specifications.Shadow Banking and the Property Market in China
Abstract
This paper studies the evolution of property values and the connections between shadow banking and property markets in China. We use Pooled Mean Group estimation to analyze Chinese house prices in 65 cities from 2007-2014, defining the “fundamentals” of housing prices with the Gordon dividend discount model, and using lagged rents, prices, real, nominal interest rates, and shadow banking activity as short term explanatory factors. We find that the cities tend to share long run fundamentals and adjust relatively quickly to deviations from the fundamentals; we do not find anything close to bubbles. We also find that house prices grow more rapidly with availability of shadow banking funds, which have grown rapidly. A policy implication for the Chinese government is to focus on regulatory monitoring in this funding sector.Discussant(s)
Tien-Foo Sing
, National University of Singapore
Ru Hong
, Nanyang Technological University
Charles Ka Yui Leung
, City University of Hong Kong
Brent Ambrose
, Pennsylvania State University
JEL Classifications
- D0 - General
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location