The user cost of housing and the price-rent ratio in Shanghai

We compute hedonic quality-adjusted price-rent ratios for residential housing in Shanghai. Our method corrects selection into owner-occupied and omitted variables. find that quality adjustment reduces the ratio by 14 percent. Even so, a of 70 2017 is still very high international standards. In cross-section, increasing price, confirming previous findings cities western countries. But it decreasing rents. attribute this new finding to asymmetric impact hukou system on owner-occupiers renters China. then examine, user-cost setting, why so high. The key driver extremely rate expected capital gains, which we argue has turned user cost owner-occupying negative. explore how affects interpretation observed ratios.