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China’s House Price: Affected by Economic Fundamentals or Real Estate Policy?

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  • Huayi Yu

    (School of Economics, Renmin University of China, Beijing 100872, China)

Abstract

Many theory and empirical literature conclude that house price can reflect economic fundamentals in the long-term. However, by using China’s panel data of 35 main cities stretching from 1998 to 2007, we find that there is no stable relationship between house price and economic fundamentals. House price has deviated upward from the economic fundamentals since government started macro-control of the real estate market. We consider that the mechanism between the house price and economic fundamentals is distorted by China’s real estate policy, especially its land policy. Meanwhile the policy itself is an important factor in explaining the changes of China’s house price. Then we estimate the dynamic panel data model on house price and the variables which are controlled by real estate policy. The result shows: land supply has negative effects on house price; financial mortgages for real estate have positive effects on house price; and the area of housing sold and the area of vacant housing, which reflects the supply and demand of the housing market, has negative effects on house price. We also find some differences in house price influence factor between eastern and mid-western cities. Finally, we propose policy suggestions according to the empirical results.

Suggested Citation

  • Huayi Yu, 2010. "China’s House Price: Affected by Economic Fundamentals or Real Estate Policy?," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 5(1), pages 25-51, March.
    • Handle: RePEc:fec:journl:v:5:y:2010:i:1:p:25-51
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-010-0002-7
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    Citations

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    Cited by:

    1. Gao Lu Zou & Kwong Wing Chau, 2015. "Determinants and Sustainability of House Prices: The Case of Shanghai, China," Sustainability, MDPI, vol. 7(4), pages 1-25, April.
    2. Bianca Biagi & Maria Giovanna Brandano & Steven B. Caudill, 2016. "Tourism and house prices in Italy," Tourism Economics, , vol. 22(5), pages 964-978, October.
    3. Chris Brooks & Matthew Lamport & Kesseven Padachi & Vinesh Sannassee & Keshav Seetah & Boopen Seetanah, 2017. "The Impact of Foreign Real Estate Investment on Land Prices: Evidence from Mauritius," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 131-146, November.
    4. Yu, Shoujin & Zhang, Ling & Zeng, Yanni & Zhang, Hao, 2017. "Dual influences of regulatory polices on real estate enterprises’ investment —based on the perspective of supply-side reform in China," Finance Research Letters, Elsevier, vol. 23(C), pages 50-57.
    5. Li, Victor Jing & Cheng, Andy Wui Wing & Cheong, Tsun Se, 2017. "Home purchase restriction and housing price: A distribution dynamics analysis," Regional Science and Urban Economics, Elsevier, vol. 67(C), pages 1-10.
    6. Xiang Gao & Wen Kong & Zhijun Hu, 2022. "The Effects of National Fundamental Factors on Regional House Prices: A Factor-Augmented VAR Analysis," JRFM, MDPI, vol. 15(7), pages 1-19, July.
    7. Korhan Gokmenoglu & Siamand Hesami, 2019. "Real estate prices and stock market in Germany: analysis based on hedonic price index," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 12(4), pages 687-707, April.
    8. Bo Li & Rita Yi Man Li & Thitinant Wareewanich, 2021. "Factors Influencing Large Real Estate Companies’ Competitiveness: A Sustainable Development Perspective," Land, MDPI, vol. 10(11), pages 1-20, November.
    9. Bianca Biagi & Maria G. Brandano & Dionysia Lambiri, 2015. "Does Tourism Affect House Prices? Evidence from Italy," Growth and Change, Wiley Blackwell, vol. 46(3), pages 501-528, September.
    10. He Gao & Walter Timo de Vries & Minrui Zheng & Jianping Ye, 2023. "State Capacity to Influence Actor Relations within the Chinese Real Estate Market: An Analytical Framework," Land, MDPI, vol. 12(8), pages 1-18, August.
    11. Xiaoping Zhou & Zhenyang Qin & Yingjie Zhang & Linyi Zhao & Yan Song, 2019. "Quantitative Estimation and Spatiotemporal Characteristic Analysis of Price Deviation in China's Housing Market," Sustainability, MDPI, vol. 11(24), pages 1-28, December.
    12. Mei Liu & Qing-Ping Ma, 2021. "Determinants of house prices in China: a panel-corrected regression approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(1), pages 47-72, August.
    13. 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.
    14. Hu, Zhining, 2022. "Six types of government policies and housing prices in China," Economic Modelling, Elsevier, vol. 108(C).
    15. Wenhao Xue & Xinyao Li & Zhe Yang & Jing Wei, 2022. "Are House Prices Affected by PM 2.5 Pollution? Evidence from Beijing, China," IJERPH, MDPI, vol. 19(14), pages 1-17, July.
    16. Çigdem Karis & Derya Altintas, 2021. "Tourism’s Effect on the Housing Prices in Turkey: The ARDL Bound Testing Approach," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 5(1), pages 249-276, August.
    17. Weizeng Sun & Siqi Zheng & David M. Geltner & Rui Wang, 2017. "The Housing Market Effects of Local Home Purchase Restrictions: Evidence from Beijing," The Journal of Real Estate Finance and Economics, Springer, vol. 55(3), pages 288-312, October.
    18. B. Biagi & MG. Brandano & D. Lambiri, 2012. "Does tourism affect house prices? Some evidence from Italy," Working Paper CRENoS 201227, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

    More about this item

    Keywords

    house price; economic fundamental; real estate policy; dynamic panel data model;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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