Safety Preference and Household Real Estate Allocation: Based on Safe Asset Attributes of Real Estate

From the perspective of safe asset theory, our paper studies the impact of the safety preference of Chinese household sector on real estate asset allocation. Based on China Household Finance Survey data, our paper shows a significant positive relationship between safety preference in the household sector and the proportion of household assets allocated to real estate. We also show that the impact of households’ safety preference on the proportion of household real estate allocation is weakened by household investment in risky financial assets and household entrepreneurial activities. A heterogeneity analysis shows that real estate assets can better meet the safety needs of households in first-tier cities, in cities with a high unemployment rate, and in cities with a low degree of climate policy uncertainty. Our findings suggests that Chinese household assets include a high proportion of real estate due to their psychological preference for safety. Our study enriches our understanding of the Chinese real estate market and the safe asset theory.