Investigation_on - The current issue and full text archive...

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Investigation on housing affordability in Lanzhou, Northwest China Mingchen Duan School of Economics and Management, Gansu Institute of Political Science and Law, Lanzhou, China Abstract Purpose – With the rapid increase in both household discretionary income and housing price, how to improve housing affordability is the vital challenge for China, especially for the northwestern region where the household income is lower than that in the eastern region. This paper aims to provide an insight into the housing affordability by analyzing the inFuence factors of purchasing standard housing in Lanzhou, which is the second largest city in Northwest China. Design/methodology/approach – Price to income ratio (PIR) and housing affordability index (HAI) approaches were applied in this study to measure housing affordability for Lanzhou. Findings – The results show that the PIR values for Lanzhou range from 6.02 to 7.23 between 2001 and 2008. The value exhibits an increasing trend before 2004 and a decreasing trend after 2004. The HAI values vary between 62.0 and 83.2 and are higher from 2001 to 2003 than those from 2004 to 2008. It was observed that the level of inFuence of the household discretionary income, housing price and the mortgage interest rate on these two values differs signi±cantly in the different studied periods. This indicates that housing affordability in Lanzhou is lower than the acceptable level. Originality/value – The paper establishes an understanding of the level of housing affordability in Northwest China, and provides the basis for the formulation of the new government’s housing policy for this region. Keywords China, Housing, Prices, Income, Interest rates, Property ±nance Paper type Research paper 1. Introduction Understanding of housing affordability is important to monitor housing market trends in the studied region. Therefore, the research on housing affordability has been a hot issue in the ±eld of real estate market (Lerman and Reeder, 1987; Whitehead, 1991; Hancock, 1993; Aboutorabi and Abdelhalim, 2000; Rosen and Ross, 2000; Hui, 2001; Kosareva and Tumanov, 2008; Liu et al. , 2008). Since China’s housing market reform launched in 1998, commodity housing has replaced welfare housing allocation system which has performed in China for decades (Wang, 2000; ²ung et al. , 2006; Rao and Zhou, 2010; Leung, 2010; ²ung et al. , 2010). This privatization effort has accelerated the real estate development. At the same time, the excessive growth of housing price also occurs year after year. Although average household annual discretionary income has increases due to the rapid growth of China’s economy, the raise in housing prices have in fact outpaced income growth. Thus, the housing affordability has also become the focus The current issue and full text archive of this journal is available at The author would like to thank Gansu Provincial Library for the assistance on data collection.
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Investigation_on - The current issue and full text archive...

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