Abstract: Although there are a number of papers that have established good view about China’s housing price growth from demand side such as currency, interest rate and demography, few research has een documented to probe China’s housing market issues from supply side. In particular, cities in China have been undergoing similar population growth, business cycle, monetary policy etc., but the housing price growth shows significant differences across cities. This paper investigates China’s housing market from the perspective of housing supply. Similar to Green et al(2005), we estimate the aggregate and disaggregate housing supply elasticity of price with data of 35 major cities in China from 1998 to 2009, and find that the aggregate housing price elasticity is 2.65, which is significantly lower than American result of 7.3 in Green et al. Meanwhile, after controlling other factors, we find that the two major determinant factors of housing supply elasticity across cities are the economic activities density and local government development regulation. Finally, our results show that local housing supply elasticity is powerful in explaining the long-run housing price growth rate across cities, which shall explain why cities bear such big housing price growth rate difference in the long-run. This reminds us that enhancing and expanding housing supply is the vital way to curb housing price growth.
source:Finance & Trade Economics ,No4,2014