Determinants of Housing Liquidity in Chinese Cities: Does Market Maturity Matter?

Housing liquidity measures the ability to convert housing to cash as an important characteristic of housing stock. A simple model of buyer offers' distributions was used to theoretically explore the determinants of housing liquidity in a search process. An empirical ordinary least squares model of the time-on-market was developed using data collected in four Chinese cities (Beijing, Shanghai, Guangzhou, and Shenzhen). The results show that in these four Chinese cities, market maturity dominates the variation of housing liquidity, with the effects of housing characteristics, seller's search cost, search strategy, and market conditions being less significant to the time-on-market equation. These empirical results indicate that the slow turn-over of housing stock may constrain the overall level of housing liquidity in major Chinese cities.