“Assessing China’s Residential Real Estate Market”

“Assessing China’s Residential Real Estate Market”

Ding Ding, Xiaoyu Huang, Tao Jin and W. Raphael Lam

IMF Working Paper WP/17/248

In this paper Ding et al. use city-level real estate data to estimate the range of overvaluation of real estate markets across city-tiers in China. Further, they assesse the main risks of a real estate slowdown and its impact on economic growth and financial stability. They assume, if house prices rise further beyond “fundamental” levels and the bubble expands to smaller cities, it would increase the likelihood and costs of a sharp correction. That could weaken growth, undermine financial stability, reduce local government spending room, and spur capital outflows