Are there irrational bubbles under the high residential housing prices in China’s major cities?
House prices in the main cities of China have been rising to historically high levels. Unsustainable growth of housing prices might cause financial crises and damage the whole economy. This research aims to detect whether bubbles dominate China’s real estate market. It begins by systematica...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Economists' Association of Vojvodina
2020-01-01
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| Series: | Panoeconomicus |
| Subjects: | |
| Online Access: | http://www.doiserbia.nb.rs/img/doi/1452-595X/2020/1452-595X2001001A.pdf |
| Summary: | House prices in the main cities of China have been rising to historically
high levels. Unsustainable growth of housing prices might cause financial
crises and damage the whole economy. This research aims to detect whether
bubbles dominate China’s real estate market. It begins by systematically
analysing the features of China’s real estate sector, followed by proposing
a theoretical framework to identify the fundamentals of house prices and
decompose house prices into cyclical and bubble components. It then applies
the vector error correction model and other econometric techniques to
testify the theoretical framework with data of seven Chinese cities from
2008M01 to 2017M12. The main findings of this research include the following
four parts. Firstly, the residential housing market of Shanghai was exposed
to the irrational bubble issue, but the rest six cities examined were at
safe positions. Secondly, both long-run and short-run relationships between
economic fundamentals and house prices have been verified. Thirdly, economic
regulations also have significant effects on house prices. Finally, this
research suggests that the root cause of the high housing prices in major
cities in China is due to the excessive capital injection into the
residential property market. |
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| ISSN: | 1452-595X 2217-2386 |