Abstract
Many theory and empirical literature conclude that house price can reflect economic fundamentals in the long-term. However, by using China’s panel data of 35 main cities stretching from 1998 to 2007, we find that there is no stable relationship between house price and economic fundamentals. House price has deviated upward from the economic fundamentals since government started macro-control of the real estate market. We consider that the mechanism between the house price and economic fundamentals is distorted by China’s real estate policy, especially its land policy. Meanwhile the policy itself is an important factor in explaining the changes of China’s house price. Then we estimate the dynamic panel data model on house price and the variables which are controlled by real estate policy. The result shows: land supply has negative effects on house price; financial mortgages for real estate have positive effects on house price; and the area of housing sold and the area of vacant housing, which reflects the supply and demand of the housing market, has negative effects on house price. We also find some differences in house price influence factor between eastern and mid-western cities. Finally, we propose policy suggestions according to the empirical results.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Arellano M, Bond S (1991). Some tests for specification for panel data: Monte Carlo evidence and an application for employment equation. Review of Economic Studies, 58: 277–297
Baltagi B H (2005). Econometric Analysis of Panel Data (3rd edition). Chichester: John Wiley & Sons, 33–35
Bernanke B S, Gertler M, Gilchrist S (1999). The financial accelerator in a quantitative business cycle framework. In: Handbook of Macroeconomics, edited by Taylor J B & Woodford M. Amsterdam: Elsevier Science. 1: 1341–1393
Capozza D R, Hendershott P H, Mack C, Mayer C J (2002). Determinants of real house price dynamics. NBER Working Paper, No. W9262
Collyns C, Senhadji A (2002). Lending booms, real estate bubbles and the Asian Crisis. IMF Working Paper No. 02/20
Enders W (1995). Applied Econometric Time Series. Chichester: John Wiley & Sons, 321
Gallin J (2006). The long-run relationship between house prices and income: Evidence from local housing markets. Real Estate Economics, 34(3): 417–438
Gerlach S, Peng W (2005). Bank lending and property prices in Hong Kong. Journal of Banking & Finance, 29: 461–481
Glindro E T, Subhanij T, Szeto J, Zhu H (2008). Determinants of house prices in nine Asia-Pacific economies. Bank for International Settlements (BIS) Working Papers, No. 263
Goodhart C (1995). Price stability and financial fragility. In: Financial Stability in a Changing Environment, edited by Sawamoto K, Nakajima Z and Taguchi H. New. York: St. Martin’s Press
Hort K (1998). The determinants of urban house price fluctuations in Sweden 1968–1994. Journal of Housing Economics, 7: 93–120
Kiyotaki N, Moore J (1997). Credit cycles. Journal of Political Economy, 105(2): 211–248
Krugman P (1991). Increasing returns and economic geography. Journal of Political Economy, 99(3): 483–499
Liang Q, Cao H (2007). Property prices and bank lending in China. Journal of Asian Economics, 18: 63–75
Mankiw G, Weil D (1989). The Baby boom, the baby bust, and the housing market. Regional Science and Urban Economics, 19(2): 235–258
McQuinn K, O’Reilly G (2008). Assessing the role of income and interest rates in determining house prices. Economic Modelling, 25(3): 377–390
Mikhed V, Zemčík P (2007). Do house prices reflect fundamentals? Aggregate and panel data evidence. Working Paper, Center for Economic Research and Graduate Education, Charles University and the Economics Institute of the Academy of Sciences of the Czech Republic
Muellbauer J, Murphy A (1997). Booms and busts in the UK housing market. Economic Journal, 107(455): 1701–1727
Peng W, Tam D C, Yiu M S (2008). Property market and the macroeconomy of Mainland China: A cross region study. Pacific Economic Review, 13(2): 240–258
Priemus H (2003). Land policy, house prices and housing quality: Empirical evidence from the Netherlands. Housing, Theory and Society, 20(3): 127–132
Seko M (2003). Housing prices and economic cycles. In: Housing Market and the Macro Economy, The Nexus Conference, Hong Kong, China. July 25–26
Stevenson S (2008). Modeling housing market fundamentals: Empirical evidence of extreme market conditions. Real Estate Economics, 36(1): 1–29
付 敏 (Fu Min) (2005). 我国房地产泡沫问题讨论综述 (Survey on the issue of China’s housing price bubble). 经济理论与经济管理, (6): 76–80
郭 文杰 (Guo Wenjie) (2006). 服务业增长、 城市化与经济发展—改革开放后中国数据的经验研究 (Service sector growth, urbanization and economic development). 当代经济科学, (5): 92–97
国家统计局综司课题组 (Research Group of National Bureau of Statistics of China) (2005). 关于房地产对国民经济影响的初步分析 (The analysis of the impact of real rast industry to China’s economy). 管理世界, (11): 30–33
黄 健柏, 江 飞涛, 陈 伟刚 (Huang Jianbai, Jiang Feitao, Chen Weigang) (2007). 对我国房价与地价相互关系的再检验 (Further test of the relationship between the housing price and the land price). 预测, (2): 1–7
况 伟大 (Kuang Weida) (2005). 房价与地价关系研究: 模型及中国数据检验 (A study on the relationship between housing price and land pricing: Basic model and evidence from China). 财贸经济, (11): 56–63
梁 云芳, 高 铁梅 (Liang Yunfang, Gao Tiemei) (2007). 中国房地产价格波动区域差异的实证分析 (Empirical analysis on real estate price fluctuation in different provinces of China). 经济研究, (8): 133–142
沈 悦, 刘 洪玉 (Shen Yue, Liu Hongyu) (2004). 住宅价格与经济基本面:1995–2002 年中国14 城市的实证研究 (Housing prices and economic fundamentals: A cross city analysis of China for 1995–2002). 经济研究, (6): 78–86
宋 勃, 高 波 (Song Bo, Gao Bo) (2007). 房价与地价关系的因果检验:1998–2006 (A causality test for housing and land prices: 1998–2006). 当代经济科学, (1): 72–78
屠 佳华, 张 洁 (Tu Jiahua, Zhang Jie) (2005). 什么推动了房价的上涨: 来自上海房地产市场的证据 (What pushes up the house price: Evidence from Shanghai). 世界经济, (5): 28–37
王 国军, 刘 水杏 (Wang Guojun, Liu Shuixin) (2004). 房地产业对相关产业的带动效应研究 (The driving effects on real estate to the correlative industries). 经济研究, (8): 38–47
严 金海 (Yan Jinhai) (2006). 中国的房价与地价: 理论、 实证和政策分析 (Land price and housing price in China: A theoretical & empirical study). 数量经济技术经济研究, (1): 17–26
张 涛, 龚 六堂, 卜 永祥 (Zhang Tao, Gong Liutang, Bu Yongxiang) (2006). 资产回报、 住房按揭贷款与房地产均衡价格 (On the asset return, mortgage lending and property price). 金融研究, (2): 1–11
Author information
Authors and Affiliations
Corresponding author
About this article
Cite this article
Yu, H. China’s house price: Affected by economic fundamentals or real estate policy?. Front. Econ. China 5, 25–51 (2010). https://doi.org/10.1007/s11459-010-0002-7
Received:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11459-010-0002-7