Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)


Planning, Development, and Preservation

Committee Member

Dr. Thomas Springer, Committee Chair

Committee Member

Dr. Elaine Worzala, Committee Co-Chair

Committee Member

Dr. James Brannan

Committee Member

Dr. James Spencer


Four phenomena can be observed in China’s housing market in the past 16 years. First, the vacancy rate of new condominium properties has increased significantly. Second, housing prices have been increasing very rapidly. In fact, the prices have rarely decreased even when strict housing policies have been mandated. Third, housing transactions are active, as indicated by the new condominiums that have been recently developed and have been sold very quickly. Finally, new construction/development had also been very active. Phenomena 2, 3, and 4 are inherently consistent, but the coexistence of phenomena 2, 3, and 4 with phenomenon 1 is very perplexing. Thus, the following research questions can be raised. 1. How can housing prices keep increasing despite high vacancy rates? 2. How can new condominiums be sold quickly when vacancy rates are high? 3. How can construction activities continue when vacancy rates are high? This is a puzzle.

This puzzle is connected with another puzzle, the excessive liquidity in China’s housing market has been oddly coexisting with insufficient demand in China’s consumer market over the past 16 years. The second puzzle can is easily observed even though it has been largely ignored over past 16 years.

The following hypotheses are put forward: Hypothesis 1: At a certain time point, higher-income households will spend a lower proportion of their income on consumption compared with lower-income households. If this hypothesis can be verified, then severe income inequality will lead to an overly-high aggregate savings rate and an extremely low aggregate consumption rate; Hypothesis 2: Overly-high aggregate savings rates and extremely low aggregate consumption rates caused by severe income inequality will induce high investment demand in the virtual sector rather than the real sector. As a result, the virtual sector will boom while the real sector will decline. Hypothesis 3: Given a declining real sector, investors will prefer houses as investments as opposed to other assets in the virtual sector due to their unique features. This leads to rapidly rising housing prices and overdevelopment.

Testing the three hypotheses above is a big challenge because the typical measure for income inequality for a country, the Gini Coefficient, announced by China’s government is not trustworthy. The data about GDP and per capita disposable income are also not reliable. For this research, a significant amount of effort was exerted to collect primary data on these variables. These efforts include establishing rapport with officials in the National Bureau of Statistics of China, obtaining special access to the database of academic and non-profit research institutes and buying data from private institutes in China. Through these efforts, improved quarterly data of GDP, housing policy, and monetary supply for 70 cities from 2000 to 2016 were obtained.



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