Estimating the willingness-to-pay for urban housing in Chinese cities

The housing market, an important component of the urban economy, is closely integrated with urban development. Urban development attracts labor inflows which then increase the housing demand in the cities. Urban dwellers' willingness-to-pay (WTP) for housing, as part of their living costs, depends on their incomes they can earn in the cities and the quality of life (QOL) they want to enjoy. Urban wage growth and quality of life improvements are always accompanied by increased demand and increased WTP. This paper uses the average wages of fully-employed employees and various city indicators to reflect the urban QOL to explain the relationships among people's WTP for housing, their urban wages and their urban QOL across 35 metropolitan cities in China. The empirical results illustrate that the urban QOL represented by city indicators and the average wage level accounts for approximately 70% of the housing price variation. Although wages still have significant impact on the WTP, the QOL in Chinese metropolitan cities tends to contribute more to the residents' WTP for housing, indicating that social and natural environments are valued by urban residents more and more.