What Drives China's House Prices: Marriage or Money?

The high and rising house prices in China are not adequately accounted for the traditional explanations emphasizing demand-driven or cost-push factors. Recent published studies claim that gender imbalance increases competition among men in the marriage market, which has pushed Chinese, especially parents with a son, to buy houses as a signal of relative status in the marriage market; this marriage competition then causes high demand for houses and eventually leads to rising house prices in China. Empirical results in this paper, however, provide little support for this hypothesis and we find that a rise in the sex ratios for most age cohorts accounts for very small percentage variations in house price movements in China during 19982009. Further investigation suggests that excess demand driven by high monetary growth was a significant cause of the rising house prices in China during 19982009. Therefore, the impact of gender imbalance on house prices should not be exaggerated and monetary dynamics remains an important leading indicator for house price movements in China.