Association for Public Policy Analysis & Management

Housing prices in Chinese cities have been soaring since the market was commercialized in 1988. Between 2000 and 2010, housing prices increased by an average of about 225%. The dramatic increase in housing prices has made it harder for families to buy houses and posed a threat to China’s financial stability and economic growth. In 2010 and 2011, in order to curb the excessive growth of housing prices, the Chinse government adopted a series of reforms, including a house purchase limit policy that restricted the number of houses one family could buy in a city. Previous empirical work has found evidence of a negative relationship between the house purchase limit policy and housing prices, but the estimated magnitude of this relationship varies across studies. Using monthly data from the DATE’s Database and the National Bureau of Statistics on housing prices in 35 largest Chinese cities during 2010 and 2011, this paper examines the extent to which the house purchase limit policy achieved its policy objectives. It extends prior analyses by incorporating a larger number of socioeconomic controls and exploring different magnitudes of the relationship across different types of cities.