Home Purchase Restriction Impact on House Prices

Abstract

With the development of the economy, the real estate industry has increasingly become a major component of China's national economic growth. In this paper, I use a house sales transaction dataset collected from a publicly accessible Chinese real estate website Lianjia to investigate the Home Purchase Restriction (HPR) policy impact on house prices over time. We select data from two cities Nanjing and Chongqing since Nanjing enacted an HPR policy in October 2016 while Chongqing does not have HPR policy in any kind. Using Chongqing as a control group, a difference-in-differences estimation result shows that the negative effect of HPR on house prices starts three months after the policy effective date and continues to dampen the house prices and reaches its strongest effect at around two years after the effective date. However, the negative effect then slightly decreases and remains stable since nine quarters after the HPR effective date.