Does Housing Policy Sustainability Matter? Evidence from China

The housing market plays an important role in the Chinese economy and society. To promote the functioning of the housing market, the Chinese government has imposed many policies and regulations. However, most of these regulations do not take sustainability into consideration. Using a difference-in-difference approach, this paper investigated the impacts of home purchase restriction (HPR) on the housing market in China. While most studies have only focused on the impacts of HPR implementation on the housing market, we also investigated the effects of HPR removal. The results revealed that HPR brings about a decline in the growth of house prices and the impacts are more significant in the short run. Furthermore, the effects of HPR vary across different cities., where they are particularly pronounced in the central and western cities. Moreover, there was no evidence to show that the removal of HPR affected house prices as expected. This suggests that it is important to improve the sustainability of housing policies, which has significant policy implications for obtaining a well-functioning housing market.