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| Do Purchase Restriction Policies Reduce the Corporate Value of Listed Real Estate Companies？ |
| LIANG Ruobing, ZHANG Dongrong, FANG Xin, LIN Xixi
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| School of Economics, Xiamen University |
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Abstract In the past 20 years, the rapid economic development and urbanization of major Chinese cities has led to rising house prices. According to the National Bureau of Statistics, the average cost of housing in 35 large and medium-size cities increased from 2,267 yuan per square meter in 2002 to 15,356 yuan per square meter in 2019. To curb excessive speculation in the property market and stabilize land prices, house prices, and price expectations, local governments began issuing a series of house purchase restriction policies in 2010. By the end of 2011, 46 cities had restriction policies on issues such as house quantity, household registration, and loan proportion. These policies were lifted in 2014 in most cities as the property markets stabilized.
However, the rapid increase in housing costs in 2015 and 2016 led to a new round of housing purchase restrictions in 60 cities by 2019. Although they differ in details, the prime goal of all of these policies is to curb rapidly rising house prices by restraining demand in the housing market. As a powerful tool for stabilizing and regulating the real estate market, these purchase restriction policies have had a great impact on real estate companies and even the real estate industry, which is a pillar of the Chinese economy. As a result, these housing market policies have attracted the attention of all parts of society.
Using a dataset of listed real estate companies from the 2008-2013 and 2015-2019 periods, this paper uses difference-in-differences (DID) models with an intensity index to empirically analyze the impact of the two rounds of housing purchase restriction policies on listed real estate companies and to identify the main channel of influence. As the real estate projects developed by listed real estate companies in different cities are different, the house purchase restrictions have different effects in different cities. To address the issue of intensity difference across real estate companies, this paper uses specific identification with accumulative intensity indexes.
First, this paper uses the proportion of listed real estate companies' sales in each city to construct an intensity index of house purchase restrictions, and then it uses an intensity DID model to determine whether either round of house purchase restrictions significantly reduces the market value of real estate companies. Then, this paper analyzes the heterogeneous effects of different house purchase restriction polices. It finds that in the first round, the most effective policies are those that control household registration, are applied to the whole city, and impose a two-house limit. In contrast, in the second round, policies applied to specific city districts and restrictions on resales are also effective.
Second, this paper analyzes the operating performance data of listed real estate companies and finds that purchase restrictions have no significant effect on most business performance indicators, with the exception of a negative impact on the solvency of enterprises in the first round. This suggests that purchase restrictions may increase the operating risk of real estate companies and have a negative impact on the development capability of enterprises in the second round. For the property market, this paper finds that the first round of purchase restrictions does not have a significant impact on urban property prices, but the second round significantly curbs the rise of house prices. Hence, the two rounds of policies have different impacts on the expectations of stock investors due to their different effects on the real estate market.
Finally, this paper analyzes the daily performance of real estate companies listed on the Shenzhen and Shanghai stock markets. Both rounds of purchase restrictions have significant negative impacts on the daily return rates and the monthly search indices of the real estate companies, showing that the effect of purchase restrictions on the value of listed real estate companies is mainly caused by investor expectation. These findings are of great significance for understanding the development of China's real estate market, specifically the effects of the current adjustments. They suggest that the two rounds of house purchase restrictions changed the market value of listed real estate companies by changing investors' expectations, reflecting the role of housing policies in stabilizing expectations. The aim of the real estate policy is to have a long-term influence on housing markets and investors' expectations by strengthening the attitude that “a house is for dwelling rather than for speculating.”
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Received: 08 January 2019
Published: 02 September 2021
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