Exploring the spatial spillover effect of home purchase restrictions on residential land prices based on the difference-in-differences approach: Evidence from 195 Chinese cities

Abstract Since 2008, the sustained and rapid escalation of housing prices has increasingly become an alarming issue in most Chinese cities, to which the government has responded by strengthening its macro-control of the housing marking. The home purchase restrictions (HPR) policy is considered the harshest regulation implemented to cool down the housing market by eliminating housing speculation. This paper investigates the spatial externality of HPR on residential land prices in surrounding unregulated cities from a spatiotemporal perspective. The HPR policy tends to relocate regulation-induced housing demand to neighboring cities without restrictions in place, thereby leading to a rise in residential land demand and prices via inter-city housing purchases. Using the difference-in-differences approach, we reveal that adopting the HPR policy leads to a 10.3 % significant increase in land prices for neighboring cities without purchase restrictions based on parcel-level land transactions in 195 Chinese cities. The causal effects are robust across different specifications. Moreover, spillovers of the HPR policy vary with different land uses and sources. The spatial heterogeneity arises from the structural changes in residential land demand in response to the HPR policy. Finally, this paper emphasizes that policymakers should consider the spatial heterogeneity, dynamic linkages between cities, and the supply side when establishing housing regulations and developing land-use plans.