Three Essays on the Chinese Housing Market: Amenities, Environment, and Policies

Abstract

This dissertation includes three essays that address economic impacts of amenities, environmental change, and development policy on the Chinese housing market. Chapter 1 examines the impact of the city water system improvement project on house prices in Guilin, China. Through model estimation, we determined housing characteristics with varying degrees of influence on house price, which are arranged sequentially with respect to housing characteristic categories from structural to location: area, age, floor level, annual income, proximity to CWSIP, proximity to downtown, proximity to major roads, and type of housing. Results suggest housing close to the CWSIP can receive a price premium, and housing with a further distance to the CWSIP receive a price discount. Further, an implicit price barrier of housing in the CWSIP surrounding areas has been revealed. These findings are consistent with consumer preference theory and the principle of resource scarcity. Chapter 2 applies a residential sorting model to identify demand for the city water system improvement. The estimation indicates that population density, GDP per capita, average personal income, and government revenue per capita positively affect the demand for the housing market, while government revenue per capita and total sales per capita are negatively correlated with the housing market demand. The second stage suggested the CWSIP is a heterogeneous commodity, as the coefficients associated with the different distance with the house location. Because the area of the city water system improvement project constitutes the study area, house prices in the district were positively impacted by CWSIP. Welfare decreases with increasing distance to the CWSIP. Household welfare reduces by 4,670 yuan, 3,812 yuan, and 2,781 yuan, when the distance to CWSIP increases from buffer 1 (within 500 m) to buffer 2 (501-1,000 m), increases from buffer 2 (501-1,000 m) to buffer 3 (1,001-1,500 m), and buffer 3 (1,001-1,500 m) to buffer 4 (over 1,500 m). The partial total welfare changes are estimated to be 1.16 billion yuan, 0.95 billion yuan, and 0.70 billion yuan respectively. Chapter 3 employs the “difference in differences” approach to examine the impact of a city hall relocation plan on housing market. Results indicate that the governmental plan and subsequent outcomes significantly improve housing prices in the affected areas. Moreover, housing prices increased quickly after the announcement of the city hall relocation plan and its impact continues through the plan implementation stage. However, these lingering impacts might weaken after the relocation has been implemented. Our finding suggests that the city hall relocation plan positively is correlated with the house price. In the short run, larger positive impacts on the untreated group occurred immediately after the announcement. However, the actual impact of relocating the city hall was weaker than the announcement on house prices in the long run. The relocation announcement has a positive gross effect on house price in the city of Guilin, which is consistent with the government’s goal of improving local economic development. However, successful governmental behavior is not only focused on one point or one area; but it also needs to balance other factors to achieve the optimal goal of improving the overall quality of life and public services.