Housing prices, income and urban quality of life : an empirical study across 35 cities in China

Abstract

Nowadays, the mobility and globalization of firms make it possible for people to choose their favorite working cities worldwide. Thus beyond employment and income, more and more attention has been paid to the comparison of urban quality of life (UQOL). As housing cost usually consists of the largest share of household budget which is thought as a “ticket” to live in a city, housing prices surely have great impact on the relative value of income and UQOL when one makes a relocation decision. With increasing inter-urban migration in China, the inter-urban real estate development becomes popular. In order to plant right crop for right land, the inter-urban differences on the combination of housing prices, income and UQOL should be well studied.

In addition, it is found that cities with high UQOL grow faster because they can attract more talents to work in (Glaeser 2001). But with more and more immigration taken place in high amenity cities, housing prices may rise up faster than workers’ wages. When the advantage of UQOL is offset by the increased housing cost, it would reach a dynamic equilibrium which lets immigration terminate or slow down. Even worse, if housing prices rise higher and higher, talents would have to move out. Therefore, it is noticeable to the urban governments that the pattern of inter-urban competitiveness changes dramatically from the traditional solely economic-driven mode to the sustainable attractiveness by the bundles of housing prices, income and UQOL.

This research aims at revealing the quantitative relationship among housing prices, income and UQOL which may give inspiration to city dwellers, developers and governments. Firstly following the compensation theory, a customized equilibrium model is developed to calculate the quantitative value of UQOL. Then a new classification method is proposed to Chinese cities based on their bundles of housing prices, income and UQOL. There are 3-high cities, 2-high (2-high-price&income, 2-high-price&UQOL, 2-high-income&UQOL) cities, 1-high (1-high-price, 1-high-income and 1-high-UQOL) cities and 3-low cities. This classification gives a new vision for city dwellers, developers and governments to recognize the substantive differences among cities which are helpful for decision making, strategy deployment and policy making. Rural labor is suggested to choose 1-high-income cities as early as better. College graduates are advised to enter 2-high-income&UQOL cities as soon as possible. The rich and famous group is recommended to enter 3-high cities to enjoy the most mature service. Inter-urban developers need to take different development strategies in different kinds of cities: develop products at popular locations in 3-high cities, create local good reputation with high-quality housing in cities with high housing prices and enter cities with high UQOL as quickly as possible. For urban governments, it’s important to keep improving UQOL in the course of the economic development. Also, they are advised to control the excessive growth of housing prices especially in 3-high cities.