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Impact of urban economic openness on real estate prices: Evidence from thirty-five cities in China

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  • Wang, Songtao
  • Yang, Zan
  • Liu, Hongyu

Abstract

Over the past decade, China's major cities have experienced significant real estate price increase which has been fueled by the sustained growth of the economic fundamentals. It is well believed that deeper integration with the world market is one of the major reasons for such high speed macroeconomic growth. In this paper, we examined the linkage between urban economic openness, the ratio of trade volume as a percentage of GDP, and urban real estate prices basing on the quality of life theory as well as Balassa-Samuelson (B-S) effects. Using panel data of 35 large Chinese cities from the year 1998 to 2006, we empirically find that for every 1% increase in urban economic openness, urban real estate prices will increase significantly by 0.282%, after controlling for other traditional demand-supply factors. Urban economic openness alone accounted for about 15.90% appreciations of Chinese real estate prices during the sample period, which is not neglectable. This result implies that urban real estate price fluctuations are potentially affected by international economic factors. The economic distance to the international market could be deemed as productive and consumption amenity for a city as well. This study enriches the perception of quality of life factors, and furthermore provides a new perspective for understanding the real estate price dynamics in the globalized economic development today.

Suggested Citation

  • Wang, Songtao & Yang, Zan & Liu, Hongyu, 2011. "Impact of urban economic openness on real estate prices: Evidence from thirty-five cities in China," China Economic Review, Elsevier, vol. 22(1), pages 42-54, March.
  • Handle: RePEc:eee:chieco:v:22:y:2011:i:1:p:42-54
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Li, Lixing & Wu, Xiaoyu, 2014. "Housing price and entrepreneurship in China," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 436-449.
    2. Zhang, Yanbing & Hua, Xiuping & Zhao, Liang, 2012. "Exploring determinants of housing prices: A case study of Chinese experience in 1999–2010," Economic Modelling, Elsevier, vol. 29(6), pages 2349-2361.
    3. repec:kap:iecepo:v:14:y:2017:i:2:d:10.1007_s10368-016-0371-1 is not listed on IDEAS
    4. Huang, Daisy J. & Leung, Charles K. & Qu, Baozhi, 2015. "Do bank loans and local amenities explain Chinese urban house prices?," China Economic Review, Elsevier, vol. 34(C), pages 19-38.
    5. Ng, Eric C.Y., 2015. "Housing market dynamics in China: Findings from an estimated DSGE model," Journal of Housing Economics, Elsevier, vol. 29(C), pages 26-40.
    6. Liu, Chunping & Ou, Zhirong, 2017. "What determines China's housing price dynamics? New evidence from a DSGE-VAR," Cardiff Economics Working Papers E2017/4, Cardiff University, Cardiff Business School, Economics Section.
    7. Yongheng Deng & Eric Girardin & Roselyne Joyeux, 2015. "Fundamentals and the Volatility of Real Estate Prices in China: A Sequential Modelling Strategy," Working Papers 222015, Hong Kong Institute for Monetary Research.
    8. Gries, T. & Grundmann, R. & Palnau, I. & Redlin, M., 2015. "Does technological change drive inclusive industrialization? : A review of major concepts and findings," MERIT Working Papers 044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. repec:eee:regeco:v:67:y:2017:i:c:p:1-10 is not listed on IDEAS
    10. Wen-Chi LIU, 2016. "Do Multiple Housing Bubbles Exist in China? Further Evidence from Generalized Sup ADF Tests," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 135-145, December.
    11. repec:gam:jlands:v:6:y:2017:i:3:p:54-:d:109306 is not listed on IDEAS
    12. Iris Claus & Les Oxley & Jie Chen & Xuehui Han, 2014. "The Evolution Of The Housing Market And Its Socioeconomic Impacts In The Post-Reform People'S Republic Of China: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 652-670, September.
    13. repec:wyi:journl:002181 is not listed on IDEAS
    14. Ren, Yu & Xiong, Cong & Yuan, Yufei, 2012. "House price bubbles in China," China Economic Review, Elsevier, vol. 23(4), pages 786-800.
    15. Xiaofang Dong & Shihe Fu & Yufei Yuan, 2013. "Impact Fees and Real Estate Prices: Evidence from 35 Chinese Cities," Frontiers of Economics in China, Higher Education Press, vol. 8(2), pages 207-219, June.
    16. Bian, Timothy Yang & Gete, Pedro, 2015. "What drives housing dynamics in China? A sign restrictions VAR approach," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 96-112.
    17. 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.
    18. repec:wyi:journl:002167 is not listed on IDEAS
    19. Anupam Nanda & Jia-Huey Yeh, 2016. "International Transmission Mechanisms and Contagion in Housing Markets," The World Economy, Wiley Blackwell, vol. 39(7), pages 1005-1024, July.

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