The unintended consequences of credit-easing policies: evidence from the housing market

This article leverages a credit-easing policy in Shanghai’s housing market as a quasi-natural experiment to investigate market dynamics. Our findings reveal that, following the policy implementation, property sellers significantly reduce listing prices by approximately 2.1% to 2.5%. Meanwhile, buyers adopt a more cautious ‘wait-and-see’ approach, reflected in lengthened decision-making periods and increased online or offline property viewings. Further analysis indicates that the credit-easing policy also pushes landlords to significantly reduce rental prices by about 2.8% to 3.6%. These unintended consequences may stem from the fact that during a downturn in the housing market, credit-easing policies are instead interpreted by the public as a signal of market weakness, thereby producing the opposite of the intended policy effect. Consequently, sellers reduce asking prices to accelerate transactions or rentals, while buyers delay their purchase decisions. This study yields novel insights into the unintended consequences of policy interventions during housing market downturns.