Climate policy uncertainty and housing dynamics: Evidence from China's major cities

As climate change intensifies, frequent shifts in climate strategies and international negotiations have created substantial climate policy uncertainty (CPU). This study examines the effects of CPU on China's housing market, an especially relevant context given China's status as the world's largest carbon emitter and its rapidly evolving climate policy landscape. Using transaction data from 35 major Chinese cities (2010–2022) and panel fixed-effects models, we find a positive association between CPU and housing prices. These results can be explained by growth options theory, which suggests that uncertainty about potential future gains incentivises investors to act rather than delay. At the same time, housing simultaneously functions as a precautionary asset, prompting homebuyers to accelerate purchases to secure long-term stability. Heterogeneous effects emerge across cities with ambitious climate targets or superior carbon performance and those with higher exposure to physical climate risks. These findings offer critical insights for investors, policymakers, and urban planners seeking to navigate the interplay between climate policy and housing market dynamics, with broader implications discussed.