Examining the policy outcomes of cancelling the house purchase restriction: quasi-experimental evidence from China

Abstract

While the impact of the house purchase restriction (HPR) policy on the housing market in China has been deeply examined, there is still little known about how the housing market varies when such policy is abandoned. To fill this gap, we first theoretically propose two hypotheses concerning the relationship between abandoning HPR policy and housing price and transaction based on the housing literature. We then examine the hypotheses by taking Jinan, China as empirical case that offer an excellent policy setting of some districts having discarded the policy while the other remains. The results derived from Synthetic Control Method (SCM) showed that the cancellation of the HPR policy plays a vital role in increasing the transaction volume, but it fails to promote house prices. The findings remain reliable after a series of placebo and robustness tests. This article adds new insight to the debate on efficacy of government intervention via more granular quantitative data, and further contributes to policy implications regarding housing market development.