What pushes up China's real estate price?
International Journal of Housing Markets and Analysis
ISSN: 1753-8270
Article publication date: 1 June 2012
Abstract
Purpose
China's real estate market is rampantly expanding. The purpose of this paper is to examine the factors underpinning China's real estate price escalation from 1998 to 2009.
Design/methodology/approach
Cointegration approach, vector error correction model and Granger causality test are adopted to analyze whether stable and long‐run equilibrium interactions exist between housing prices and key macroeconomic variables, such as CPI, land sale and GDP.
Findings
Cointegration analysis shows long‐term equilibrium between real estate price (HP) and CPI or GDP, but not land sale. A bilateral Granger causality is observed between CPI and HP. However, GDP does not Granger cause HP, indicating personal gain (disposable income) does not catch up with national gain (GDP) in China, or “Guojinmintui” (national gain outpaces personal gain). Neither is there a feedback effect from HP to GDP, indicating housing price appreciation does not result in immediate capital gain or speculations in housing purchase. Besides, lack of cointegration relationships between HP and land sale is probably caused by restrictive polices on land supply.
Originality/value
This paper represents the first attempt to adopt cointegration approach and Granger causality tests to examine the real estate price escalation in China using national monthly data. Econometric analysis and subsequent policy discussion suggest that real estate price is driven by both economic and institutional factors. In particular, “Guojinmintui” is a fiscal issue while capital gain is a monetary issue. Together with land market policies, these institutional factors significantly contribute to the price escalation.
Keywords
Citation
Li, J. and Chiang, Y. (2012), "What pushes up China's real estate price?", International Journal of Housing Markets and Analysis, Vol. 5 No. 2, pp. 161-176. https://doi.org/10.1108/17538271211225913
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited