Property prices have been rising at an alarming speed in many Chinese cities in the last ten years. For instance, official statistics show that house prices in Shanghai and Beijing more than tripled between 2006 and 2016 (see Figure 1). If this trend continues, housing affordability will be a real issue. At the 19th National Congress in October 2017, the central government sent out clear signals that measures will be taken to curb house prices effectively. There have been heated debates about how to get this done. Will property tax help? Should we keep an even tighter leash on second-home purchases? Chinese leaders have been very good at conducting experiments to test the effectiveness of alternative policies before rolling them out nationwide. However, housing policies often take a long time to show effects, and the effects are almost inevitably to be confounded by other factors that have changed in the same period of time. It is very difficult to get a clear answer from such experiments.

Figure 1: House prices and land supply in the four provincial level cities in China

Lines represent house prices and are shown on the left axis. Bars represent land supply on the right axis.
Source: China Statistics Yearbook 2007-2016