China's Urban Housing Reform: Price-Rent Ratio and Market Equilibrium

Abstract

China's urban housing marketisation hinges on a sensible ratio of housing price to rent. This research derives a rational level for such a ratio and examines its distortions under the Chinese system. It shows that the prevailing housing price to rent ratios are significantly higher than the rational level for both subsidised and free-market housing. Unique Chinese housing market equilibria are analysed and policy recommendations on commercialising Chinese urban housing are suggested.