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Are House Prices Rising Too Fast in China?

Author

Listed:
  • Ashvin Ahuja

    (Asia-Pacific Department of International Monetary Fund)

  • Lillian Cheung

    (Research Department, Hong Kong Monetary Authority)

  • Gaofeng Han

    (Research Department, Hong Kong Monetary Authority)

  • Nathan Porter

    (Asia-Pacific Department of International Monetary Fund)

  • Wenlang Zhang

    (Research Department, Hong Kong Monetary Authority)

Abstract

Sharp increase in house prices combined with the extraordinary lending growth in Mainland China during 2009 has led to concerns of an emerging real estate bubble. We find that, for China as a whole, the current levels of house prices do not seem significantly higher than would be justified by underlying fundamentals. However, there are signs of overvaluation in some cities¡¦ mass-market and luxury segments. Unlike advanced economies before 2007-8, prices have tended to correct frequently in China. Given persistently low real interest rates, lack of alternative investment and mortgage-to-GDP trend, rapid property price growth in China has, and will continue to have, a structural driver.

Suggested Citation

  • Ashvin Ahuja & Lillian Cheung & Gaofeng Han & Nathan Porter & Wenlang Zhang, 2010. "Are House Prices Rising Too Fast in China?," Working Papers 1008, Hong Kong Monetary Authority.
    • Handle: RePEc:hkg:wpaper:1008
    as

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    File URL: http://www.hkma.gov.hk/media/eng/publication-and-research/research/working-papers/HKMAWP10_08_full.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    House price; price misalignment; financial stability; leverage cycle;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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