The Formation Of Housing Price Expectations In China: A Case Study Of Beijing

Despite numerous studies have been devoted to test the rational expectations hypothesis, as well as the efficient market hypothesis in the housing market since the 1980s, there are still many questions need to be answered. Hence the last decade the intense housing price volatility in China provides a good opportunity to study the formation of housing price expectations and its role in the price volatility. China is undergoing an unprecedented urbanization and high-speed economic growth, which leads to a lasting bull market since the housing reform launched in 1998; on the other hand, the housing market in China is strictly control by the government, which is significantly different with the scenario in western countries. Consequently, the formation of housing price expectations in China is believed to be different with the expectations studied in the previous researches. In this study not only the rational expectations hypothesis will be tested in Beijing, the capital of China, but also the adaptive expectations hypothesis, which is usually not included in the previous studies. Additionally, most of the existing studies on the housing market expectations rely on the macro level data, these researches can only test if the 'market' forms expectations rationally or adaptively on the market level, which could not reveal how the specific market players form their price expectations. In this research a more comprehensive survey will be conducted in Beijing to reveal how the housing market players form their price expectations individually. In terms of coverage, both the home buyers and potential buyers will be included to get an overall perspective of the formation of housing price expectations.