Can a house resale restriction policy curb speculation? Evidence from a quasi-natural experiment in China

Speculative opportunity is commonly defined as the chance for agents to resell an asset at a higher price. Few previous studies have analyzed how speculation works in housing markets. In this paper, we use a two-stage resale restriction policy implemented in China as an exogenous shock on the speculation chance in the second-hand housing market. We find that a sudden reduction in the future resale opportunity directly causes a significant decrease in house transaction prices and trading volumes. The findings may help regulators strategically intervene in the housing market by adjusting the resale rights of home buyers.