Empirical Study of the Impact of Regional Income on Housing Price: Evidence from Chinese 35 Large Cities

The purpose of this paper is to study the impact of income on housing price theoretically and empirically. The housing demand is supposed to be determined by house purchaser's ability to debt, which is conditioned on income and mortgage interest rate. The panel data analysis of Chinese 35 large cities shows: firstly, the correlation between housing price and GDP in China are much stronger than in United States; secondly, the effect of income on housing price is significant; thirdly, the impact of income on housing price has regional disparity. The income elasticity of house price is highest in the east area of China. The income elasticity of house price is 0.65, 0.52 and 0.62 in east, middle and west areas of China respectively. The policy implications is that: first, as loan ability are the important factors of housing demand, the government should take credit control policy to restrain increasing housing price; second, as the income elasticity of housing price has regional disparity, the government should make real estate macro-control policy according to regional characteristics.