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Housing Markets in China and Policy Implications: Comovement or Ripple Effect

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  • Shu-hen Chiang

Abstract

The overheated housing market has recently become a top priority of the Chinese authorities and whether the ripple effect exists is key to understanding this housing issue. The present paper uses a cointegration estimation technique for six first-tier Chinese cities during the 2003–2013 period to show that the comovements among housing prices in China are fully reflected in a long-run equilibrium. Using the Toda–Yamamoto causality test, the ripple effect is found to be characterized by a lead–lag relationship. More importantly, it is found that Beijing is the main source of housing price appreciation in China, and should be targeted as the regulatory object to efficiently resolve the troubles in this increasingly high housing-price era.

Suggested Citation

  • Shu-hen Chiang, 2014. "Housing Markets in China and Policy Implications: Comovement or Ripple Effect," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(6), pages 103-120, November.
    • Handle: RePEc:bla:chinae:v:22:y:2014:i:6:p:103-120
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    4. Qin Xiao, 2023. "Equilibrating ripple effect, disturbing information cascade effect and regional disparity – A perspective from China's tiered housing markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 858-875, January.
    5. Tsai, I-Chun & Chiang, Shu-Hen, 2019. "Exuberance and spillovers in housing markets: Evidence from first- and second-tier cities in China," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 75-86.
    6. Cheng-Wen Lee & Shu-Hen Chiang & Zhong-Qin Wen, 2023. "Pursuing the Sustainability of Real Estate Market: The Case of Chinese Land Resources Diversification," Sustainability, MDPI, vol. 15(7), pages 1-19, March.
    7. Chunping Liu & Zhirong Ou, 2021. "What determines China's housing price dynamics? New evidence from a DSGE‐VAR," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3269-3305, July.
    8. Lee, Hahn Shik & Lee, Woo Suk, 2019. "Cross-regional connectedness in the Korean housing market," Journal of Housing Economics, Elsevier, vol. 46(C).
    9. Chunping Liu & Zhirong Ou, 2022. "Revisiting the determinants of house prices in China’s megacities: Cross‐sectional heterogeneity, interdependencies and spillovers," Manchester School, University of Manchester, vol. 90(3), pages 255-277, June.
    10. Shu-hen Chiang, 2016. "Rising residential rents in Chinese mega cities: The role of monetary policy," Urban Studies, Urban Studies Journal Limited, vol. 53(16), pages 3493-3509, December.
    11. Junjie Li & Li Zheng & Chunlu Liu & Zhifeng Shen, 2021. "Information Spillover Effects of Real Estate Markets: Evidence from Ten Metropolitan Cities in China," JRFM, MDPI, vol. 14(6), pages 1-19, May.
    12. Xiandeng Jiang & Le Chang & Yanlin Shi, 2023. "Housing price diffusions in mainland China: evidence from a spatially penalized graphical VAR model," Empirical Economics, Springer, vol. 64(2), pages 765-795, February.
    13. Chen, Chien-Fu & Chiang, Shu-hen, 2022. "Portfolio diversification possibilities between the stock and housing markets in G7 countries: Evidence from the time-varying Granger causality," Finance Research Letters, Elsevier, vol. 49(C).
    14. Leeyoung Kim & Wonseok Seo, 2021. "Micro-Analysis of Price Spillover Effect among Regional Housing Submarkets in Korea: Evidence from the Seoul Metropolitan Area," Land, MDPI, vol. 10(8), pages 1-21, August.
    15. Chien-Fu Chen & Shu-hen Chiang, 2020. "Time-varying spillovers among first-tier housing markets in China," Urban Studies, Urban Studies Journal Limited, vol. 57(4), pages 844-864, March.
    16. Jin Hu & Xuelei Xiong & Yuanyuan Cai & Feng Yuan, 2020. "The Ripple Effect and Spatiotemporal Dynamics of Intra-Urban Housing Prices at the Submarket Level in Shanghai, China," Sustainability, MDPI, vol. 12(12), pages 1-17, June.
    17. Yu, Qing & Hui, Eddie Chi-Man & Shen, Jianfu, 2023. "Do local governments capitalise on the spillover effect in the housing market? Quasi-experimental evidence from house purchase restrictions in China," Land Use Policy, Elsevier, vol. 133(C).
    18. Xiaoguang Liu & Jian Yu & Tsun Se Cheong & Michal Wojewodzki, 2022. "The Future Evolution of Housing Price-to-Income Ratio in 171 Chinese Cities," Annals of Economics and Finance, Society for AEF, vol. 23(1), pages 159-196, May.

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