Advertisement

China’s Housing Price: Where Are the Bubbles?

  • Xiaocong Zhang
  • Juann H. HungEmail author
Chapter

Abstract

This chapter investigates evidence of housing bubbles in different locations of China by looking at data at the provincial and city levels from late 1990s to 2016, using the price-to-rent analysis and the generalized sup-Augumented Dickey-Fuller Test (GSADF) test. The price-to-rent ratio analysis indicates that housing bubbles began to develop in Shenzhen and Xiamen as early as 2007, while the bubble in Beijing, Hangzhou, Ningbo, Hefei, and Wenzhou started later in 2009. Those findings are largely consistent with results of the GSADF test. We also observe that the government intervention has been quite effective in maintaining a relatively stable upward trend in housing prices by timely interventions either to revive a depressed market or dampen an overheating market. Even though it has been propping up the upward trend in housing prices, even allowing it to rise in an explosive pace at times, it also does not hesitate to use policy intervention to cause moderate downward adjustments to avoid spectacular burst.

References

  1. Campbell, J. and Shiller, J. (1988), “The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors”, The Review of Financial Studies: 1(3), 195–228.CrossRefGoogle Scholar
  2. Caspi, I. (2013), “Rtadf: testing for bubbles with Eviews”, MPRA Paper, No.58791.Google Scholar
  3. Diesteldorf, J., Meyer, S., and Voelzke, J. (2016), “New evidence for explosive behavior of commodity prices”, CQE Working Papers: 2016, (50).Google Scholar
  4. Evans, G. (1991), “Pitfalls in Testing for Explosive Bubbles in Asset Prices”, The American Economic Review: 81(4), 922–930.Google Scholar
  5. Ma, D. and Sun, X. (2008), “A research on the real rent-to-price ration in Chinese real estate market”, Study & Exploration: 2008(2), 149–153.Google Scholar
  6. Malpezzi, S. (1999), “A Simple Error Correction Model of House Prices”, Journal of Housing Economics: 1999(8), 27–62.CrossRefGoogle Scholar
  7. Mankiw, N. G., and Weil, D. N. (1989), “The baby boom, the baby bust, and the housing market a reply to our critics”, Regional Science and Urban Economics: 1989(19), 235–258.CrossRefGoogle Scholar
  8. Pavlidis, E. G. et al. (2013), “Episodes of Exuberance in Housing Markets: In Search of the Smoking Gun”, Working Paper of Globalization and Monetary Policy Institute of Federal Reserve Bank of Dallas, No.165.Google Scholar
  9. Phillips, P. C., Shi, S. and Yu, J. (2012), “Testing for Multiple Bubbles”, Cowless foundation Discussion Papers, No. 1843.Google Scholar
  10. Phillips, P. C., Shi, S. and Yu, J. (2013), “Testing for multiple bubbles: Historical episodes of exuberance and collapse in the S&P 500”, International Economic Review: 56(4), 1043–1078.CrossRefGoogle Scholar
  11. Phillips, P. C., Wu, Y., and Yu, J. (2011), “Explosive behavior in the 1990s NASDAQ: When did exuberance escalate asset values?”, International Economic Review: 52(1), 201–226.CrossRefGoogle Scholar
  12. Phillips, P. C. and Yu, J. (2011), “Dating the Timeline of Financial Bubbles during the Subprime Crisis”, Quantitative Economics: 2(3), 455–491.CrossRefGoogle Scholar
  13. Poterba, J., Weil, D., and Shiller, R. (1991), “House Price Dynamics: The Role of Tax Policy and Demography”, Brookings Papers on Economic Activity: 1991(2), 143–203.CrossRefGoogle Scholar
  14. Rosenzweig, M. and Zhang, J. (2014), “Co-residence, life-cycle savings and intergenerational support in urban China”, Center Discussion Paper of Economic Growth Center, Yale University, No. 1039.Google Scholar
  15. Shiller, R. (2000), Irrational Exuberance. Princeton, New Jersey: Princeton University Press.Google Scholar
  16. Wang, Y., Wang, D., and Wei, Y. (2013), “Spatial differentiation patterns of housing price and housing price-to-income ratio in China’s cities”, unpublished paper presented at ‘2013 21th International Conference on Geoinformatics’, Kaifeng, China, 20–22 June 2013.Google Scholar
  17. Wei, S. and Zhang, X. (2011), “The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China”, Journal of Political Economy: 119(3), 511–564.CrossRefGoogle Scholar
  18. Wu, G. (2011), “An Investigation on the market of Wenzhou Private Lending”, Zhejiang Finance, 2011(8), 25–27.Google Scholar
  19. Zhang, Y. (2005), “The “Wenzhou Factor” in Rapid Growth of Housing Price in Hangzhou”, Commercial Times: 2005(11), 69–70.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.International Business School SuzhouXi’an Jiaotong-Liverpool UniversitySuzhouChina

Personalised recommendations