Demystifying the Chinese housing boom

That is the next NBER macro paper at these sessions, by Fang, Gu, Xiong, and Zhou, here is the pdf.  The abstract is this:

We construct housing price indices for 120 major cities in China in 2003-2013 based on sequential sales of new homes with the same housing developments. By using these indices and detailed information on mortgage borrowers across these cities, we find enormous housing price appreciation during the decade, which was accompanied by equally impressive growth in household income,e xcept in a few first tier cities.  Housing market participation by households from the low-income fraction of the urban population remained steady.  Nevertheless bottom-income mortgage borrowers endured several financial burdens by using price to‐income ratios over eight to buy homes, which reflected their expectations of persistently high income growth into the future.  Such future income expectations could contract substantially in the event of a sudden stop in the Chinese economy and present an important source of risk to the housing market.
That sounds a bit ordinary, and I didn’t have much time to read through this one in advance, so let’s see from the presentation what is new in there, my live-blogging will be in the comments section of this post…


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