NEW YORK, Dec. 19, 2017 — Despite recent measures to reign in China's surging property markets, the price of home ownership in China continues to soar, outpacing increases in income nationwide and rates of housing prices worldwide. Even in this climate, China maintains one of the highest rates of home ownership in the world. New research from Columbia Business School offers an explanation: for single men looking to marry, owning a home has increasingly become a key status symbol in the hunt for a spouse, which in turn has driven up prices and led to an inflated housing market.
Starting in the 1980s, China's strict family planning policy and the increasing availability of ultrasound B machines led to aggressive sex selective abortions. This resulted in a progressively more male to female sex ratio. By 2005, the national sex ratio at birth had risen to 120 boys to every 100 girls. As a result, there has been a skewing of the gender proportions, which increases competition in the marriage market and because home ownership is a more transparent form of wealth than one's bank account or stock portfolio, it has led to a surge in housing prices.
“The one-child policy inspired many more single men to buy homes – using home ownership to compete in an increasingly competitive marriage market,” said Shang-Jin Wei, co-author of the study, Chazen Senior Scholar and N T Wang Professor of Chinese Business and Economy at Columbia Business School. “This extra boost in the demand for owned homes has pushed up home prices to remarkably high levels.”
Behind the Research
The research, titled Home Ownership as Status Competition: Some Theory and Evidence, asserts that China's one-child family planning policy, and the sex ratio imbalance that resulted from it, has been an underlying source of the dramatic rise in housing prices across the country.
Shang-Jin Wei and his co-authors, Xiaobo Zhang of Peking University's National School of Development and Yin Liu of Tsinghua University, examined regional variations in these disproportionate sex ratios and linked them with variations in home sizes and prices. The researchers found that the higher the sex ratio, the higher the home price. Strikingly, the sex ratio imbalance accounted for between 30-48% of the increase in real housing prices in 35 major cities during the 2003-2009 period studied.
Stabilizing the Housing Market: China and Beyond
The researchers note that high housing prices have become an issue of concern for both the Chinese government and its citizens. While there have been several policy measures implemented in an effort to moderate the growth rate of housing prices, the price of homes in many cities and suburbs continues to rise too fast relative to the growth of income. In 2015, one such policy measure relaxed China's family planning policy from one child to two children, which has begun to help moderate the gender balance. But, according to Wei, this move is not enough. He recommends offering rewards to families having a daughter, calling this idea “one of the most sustainable ways to moderate future growth of housing prices by accelerating the rebalancing pattern.”
Wei stresses that there are implications for economies with similarly skewed sex ratios like Hong Kong, Singapore, Vietnam and India. Vietnam and India, for example, are likely to experience similar issues as China. Future research is needed to investigate the role of sex ratio imbalance on these housing markets.
This research is linked to Wei's study on household savings, titled The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China, given that a practical way for households to save is to buy an expensive asset like a house.
The paper on household savings, co-authored with Xiaobo Zhang, finds that as the sex ratio rises, Chinese parents with a son raise their savings in a competitive manner in order to improve their son's relative attractiveness for marriage. In turn, this pressure to save spills over to other households, creating an environment where household savings is a priority.
To learn more about the cutting-edge research being conducted at Columbia Business School, please visit www.gsb.columbia.edu.
About Columbia Business School
Columbia Business School is the only world-class, Ivy League business school that delivers a learning experience where academic excellence meets with real-time exposure to the pulse of global business. Led by Dean Glenn Hubbard, the School's transformative curriculum bridges academic theory with unparalleled exposure to real world business practice, equipping students with an entrepreneurial mindset that allows them to recognize, capture, and create opportunity in any business environment. The thought leadership of the School's faculty and staff, combined with the accomplishments of its distinguished alumni and position in the center of global business, means that the School's efforts have an immediate, measurable impact on the forces shaping business every day. To learn more about Columbia Business School's position at the very center of business, please visit www.gsb.columbia.edu.
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SOURCE Columbia Business School
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