House price expectations, mortgages, and subjective well‐being in urban China

• Published date: 01 December 2021
• Author: Zhifang Su,Jr‐Tsung Huang,Arthur Jin Lin
• Date: 01 December 2021
• DOI: http://doi.org/10.1111/joca.12334

SPECIAL ISSUE

House price expectations, mortgages, and

subjective well-being in urban China

Zhifang Su

1

| Jr-Tsung Huang

2

| Arthur Jin Lin

3

1

School of Economics and Finance,

Huaqiao University, Quanzhou, China

2

Department of Public Finance, National

Chengchi University, Taipei, Taiwan

3

Graduate Institute of International

Business, National Taipei University,

New Taipei City, Taiwan

Correspondence

Jr-Tsung Huang, Department of Public

Finance, National Chengchi University,

Taipei, Taiwan.

Email: jthuang@nccu.edu.tw

Abstract

This study aims at investigating the roles of house price

expectations and mortgages in urban dwellers' subjective

well-being (SWB) in China. Using 3,717 urban house-

holder respondents collected in the 2011 China Household

FinanceSurveyandcategorizingthesampleintothree

subsamples: homeowners without and with a home loan,

and nonhomeowners, the ordered logit models of the

ordinal-dependent variable SWB with and without consid-

ering the endogeneity problem are estimated using these

three subsamples separately. The primary finding is that

house price expectations have a negative influence on the

likelihood of having a better SWB only for homeowners

without a home loan. However, more houses can mitigate

this negative influence. For homeowners with a home

loan, mortgages have a negative impact on the likelihood

of having a better SWB. Finally, the Beijing sample based

on the 2017 data also supports the influences of house

price expectations and mortgages on SWB.

KEYWORDS

house price expectations, ordered logit model, subjective well-being

1|INTRODUCTION

In the past 40 years, the economic performance of China has been very successful. At the pre-

sent time, the economic growth of China is still higher than that of the rest of the world as a

whole. This impressive progress in terms of economic performance comes with an

Received: 31 October 2019 Revised: 18 August 2020 Accepted: 26 August 2020

DOI: 10.1111/joca.12334

Copyright 2020 by The American Council on Consumer Interests

1540 J Consum Aff. 2021;55:1540–1562.wileyonlinelibrary.com/journal/joca

overwhelming increase in house prices in China. The real estate market in China has experi-

enced a very prosperous development due to a series of market-oriented housing reforms initi-

ated in 1994.

1

The privatization of housing has had strong impacts on China's real estate

market that became the largest residential mortgage market in Asia in 2005. However, prior to

2008, as the rapid development of China's real estate market gave rise to public concerns over

overheating, a series of policies were implemented by the Government of China (GoC) to cool

down the market,

2

but were quickly abolished and tightened in some cases due to the 2008

financial crisis. The GoC further triggered a massive stimulus package to boost the growth of

the real estate market and this resulted in house prices being driven upwards again. Currently,

the GoC is still introducing a series of measures to increase property purchases, especially in

urban areas.

3

According to the China Statistical Yearbook 2017, in 2002, the average sale price

of a commodity house was 2,359 RMB per square meter (/m

2

) in China. The commodity house

price kept rising and the average sale price of a commodity house reached as high as 7,623.4

RMB/m

2

in March 2016. Moreover, this average price was even higher in the so-called superior

first-tier cities, such as Beijing, Shanghai, Guangzhou, and Shenzhen, and could have been even

more than 20,000 RMB/m

2

.

Average house prices in most cities in China, especially the largest ones, such as Beijing,

Shanghai, and Shenzhen, were 21 times as much as average annual income as indicated by

Lv (2010). They even reached up to 30 times as much as pointed out by Zhang (2013). Without

a doubt, the upward trend in house prices may affect people's well-being. Several studies have

paid attention to the influence of house prices on people's subjective well-being (SWB). Lin

et al. (2012) asserted that house prices had a negative influence on people's SWB, meaning that

the higher the house price, the lower the people's SWB. Furthermore, this influence could differ

among different people. An increase in house prices will damage renters' SWB, but will improve

homeowners' SWB. This positive influence of house prices on homeowners' SWB is higher for

multi-homeowners than for single-homeowners.

In economics, people's expectations play a very important role in their economic behavior

as well as their well-being. The role of expectations in well-being has been discussed in relation

to some factors, such as income, wealth, career, and working conditions. According to Li and

Liu (2012), it is indicated that any expectations of improving the above factors can enhance peo-

ple's SWB. In addition, Cheng et al. (2013) suggested that homeowners who perceive local secu-

rity to be better, expect the economy to get better, or expect commodity prices to increase have

a higher SWB. In the real estate market, as people expect house prices to be higher in the

future, this might on one hand give rise to a negative impact on SWB of those who plan to buy

houses at a later date, but might cause homeowners to expect their wealth to be higher in the

future, further increasing their well-being on the other. However, the issue regarding how

house price expectations affect people's SWB has not yet attracted the attention of many

scholars.

The purpose of this study is to investigate the influence of house price expectations on peo-

ple's SWB in urban China. This study has adopted a data set collected in 2011 through the

China Household Finance Survey (CHFS) conducted by the Survey and Research Center for

China Household Finance at the Southwestern University of Finance and Economics, China.

The primary variable that we use, namely, house price expectations, is only available nation-

wide in the 2011 survey (CHFS2011, hereafter),

4

and uses an ordered logit (ologit, hereafter)

model because of an ordinal dependent variable SWB. The contributions of this study are as fol-

lows. Differing from the literature, this study directs attention not only to homeowners with or

without a home loan, but also to house-renters/nonhomeowners due to the different

SU ET AL.1541