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Determinants of house prices in China: a panel-corrected regression approach

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Abstract

This paper uses annual data from 31 provinces, municipalities and autonomous regions in China from 2000 to 2018 to examine the determinants of Chinese house prices with a panel data regression method. Our finding suggests that land price, loans of real estate developers, per capita saving and the proportion of people with college or above educational degrees significantly drive up house prices, while the number of unemployed population has a significant negative impact. These five variables account for 72 percent variations in house prices across the country. Other economic fundamentals such as inflation, interest rate, per capita gross domestic products (GDP), and rent cost do not have significant influences on house prices. The econometric model is then used to assess the existence of house price bubbles in those provincial-level divisions in China by comparing their actual price levels with those predicted by the model. If the trend of house price growth during 2002–2014 found in the present study is the true long-run trend of house prices in China, with a few exceptions, the house prices in most provincial-level divisions are not overvalued by the end of 2014.

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Fig. 1

Source: China Statistic Yearbook 2020

Fig. 2

Source: China Statistics Bureau

Fig. 3

Source: China Statistics Bureau

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Notes

  1. In order to make sure the variables cointegrated in the model, we use the natural logarithm of land price instead of the level of land price.

  2. The prediction is done until 2014 because saving’s data are not available since 2015.

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Acknowledgements

We thank participants at the 2017 China Economic Association Annual Conference for helpful comments and suggestions on earlier draft of the paper. All errors are our own.

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Authors and Affiliations

  1. Department of Finance and Trade, NingboTech University, 1 Qinghu South Road, Ningbo, 315100, China

    Mei Liu

  2. Department of Finance, Accounting and Economics, The University of Nottingham Ningbo China, 199 Taikang East Road, Ningbo, 315100, China

    Qing-Ping Ma

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Correspondence to Mei Liu.

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Liu, M., Ma, QP. Determinants of house prices in China: a panel-corrected regression approach. Ann Reg Sci 67, 47–72 (2021). https://doi.org/10.1007/s00168-020-01040-z

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