Research On The Impact Of The Home Purchase Restriction On Housing Prices And Rents

The Chinese government issued a series of macro-control policy to ensure the development of the real estate market. While there are still some inevitable problems appeared in the process of market operation. Since 2010, the Central Government adopted one of the strictest policy, the Home Purchase Restriction, to limit the number of qualified housing buyers and purchase amount, so that the speculative demand can be restrained. This polity is different from those measures taken before, which is one of the administrative intervention that regulate the behavior of market participants.Some scholars have already carried out relevant research on the impact of Home Purchase Restriction on housing prices and sales volume, but few studies focused on the whole market include rental and sales market. According to relevant theory, the existence of Tenure Choice mechanism indicates a high degree of relevance of these two markets. In this paper, based on the Partial Equilibrium Theory, the author established a partial dynamic equilibrium model which contain the interaction between sales market rental market, then used the numerical simulation method to systematically research the changes of equilibrium prices and rents, as well as the influential mechanism of Home Purchase Restriction.The results turned out to be clear. The Home Purchase Restriction can bring significant influence to the prices and rents in a short time and if the long-term implementation of this policy is credible, it can reduce the long-term equilibrium price of sales market, but cause a rise of the long-term equilibrium rents at the same time.This paper used the Simultaneous Equations Models to do the empirical research, based on the panel data of the monthly price and rent index and relevant economic factors of Beijing, Shanghai, Guangzhou and Shenzhen, the first-tier cities in China, from 2007 to 2015. The result verified the conclusion that Home Purchase Restriction can significantly reduce the housing prices as well as increase the rents. The influential factors of house prices and rents in first-tier cities are somewhat different, but not independent from each other. The factors of housing prices include basic economic factors, real estate investment, development situation and expected house price growth. While rents are mainly affected by economic fundamentals, family income, contribution of tertiary industry in GDP and expected housing price growth.Then the author used the Simultaneous Equations Models to do a comparative study of the segment data before and after Home Purchase Restriction, which showed that the relationship between prices and rents had changed. With the implement of this policy, rents have a significant effect on housing prices, and it shows the similarity of change trend between housing prices and rents. In addition, it can improve the mutual replacement of owner-occupied and renter-occupied house.Prices and rents have their own formation mechanism. Though they have different influence factors, they are not independent. The prices and rents will make significant changes in the factors after the implementation of Restriction policy. Although the policy will lead to rising rents, it promotes the development of the housing rental market at the same time. With the urbanization and industrial upgrading, rental market of the first tier cities will try to meet more diversified demand. To some extent, Home Purchase Restriction makes some contribution. The development of rental market and the formation of tenure choice mechanism will promote the market.In conclusion, if the government wants to achieve policy objectives, it need establish a long-term control mechanism and improve the credibility of the policy. At the same time, cooperating with other policies which can be useful to the construction of rental market and reducing the use of intervention policy are also crucial to the development of housing market in the future.