title: Housing and wealth accumulation: evidence from China
Creators: name: Long, Jinqiao
Publisher: name: University of Glasgow
Year: 2023

description: Homeownership is the most prevalent tenure in most countries. One of the main purposes of households in accessing homeownership is to accumulate wealth. Homeowners are not only found to accrue housing wealth but also own more non-housing wealth than tenants. The patterns of accumulating wealth through homeownership and its socio-economic consequences in modern economies, however, have not been fully understood and examined. Using data from the 2013-2017 China Household Finance Survey and the 2015-2017 Chinese Housing Consumption Survey, this research investigated the relationships between homeownership and wealth and its components. It explored diverse mechanisms derived from different theoretical perspectives and linked homeownership with wealth inequality and housing strategies in urban China. Through a combination of the Differences-in-Differences model, Logit model, fixed-effect model and Tobit model, the empirical results from this thesis suggest that the transition of households from renting to owning is positively related to wealth holdings after controlling for relevant, confounding variables. Households accumulate housing wealth mainly through housing price appreciation and mortgage repayments, with housing price appreciation dominating. With long-term housing price increases, housing wealth accumulation has transformed from relying on saving through mortgage repayments to being more dependent on capital gains. There is a trade-off between mortgage repayments and residual savings. When controlling for socioeconomic characteristics and time-constant variables, homeowners do not own more non-housing wealth than tenants. The widely recognised notion that homeowners own more non-housing wealth than tenants comes from the result of selection. In other words, households who attain homeownership are wealthier before they become homeowners than households who remain in rental markets. Tenants do not compensate for their disadvantage in housing assets by augmenting more non-housing wealth. The favourable status of wealth holdings by homeowners relative to renters, therefore, principally arises from the accumulation of housing wealth through housing price appreciation rather than from the fixed commitments of mortgage repayments, changed saving behaviour and the accumulation of non-housing wealth through homeownership, at least for the time before 2022. Growing home ownership has typically been connected with spreading wealth and reducing wealth inequalities. The results reported in this thesis, however, indicate that associated with housing prices increasing ahead of income since 2015 in China, the accumulation of wealth through homeownership has begun to act as a possible mechanism of increasing wealth inequalities by concentrating more wealth in developed regions which attract more capital, and in the hand of homeowners, multiple-property owners, and older generations. The changes in housing price dynamics and wealth accumulation patterns also promoted the use of speculative strategies among households and, in consequence, housing policies inherited from the savings era may not be best designed to cope with challenges caused by rising housing prices. Corresponding with these findings, this thesis thus proposes policy reforms on housing, land and tax.