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A Vector Auto Regression Model Applied to Real Estate Development Investment: A Statistic Analysis

Author

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  • Fengyun Liu

    (School of Management, China University of Mining & Technology, Xuzhou 221116, China)

  • Shuji Matsuno

    (Department of Economics, Ritsumeikan University, Kusatsu 525-8577, Japan)

  • Reza Malekian

    (Department of Electrical, Electronic & Computer Engineering, University of Pretoria, Pretoria 0002, South Africa)

  • Jin Yu

    (College of Economics and Management, Northwest A & F University, Yangling 712100, China)

  • Zhixiong Li

    (UNSW Australia, Sydney 2052, Australia)

Abstract

This study analyzes the economic system dynamics of investment in real estate from mainly four participants in China. Local governments limit the supply of commercial and residential land to raise fiscal revenue, and expand debts by land mortgage to develop industrial zones and parks. Led by local government, banks and real estate development enterprises forge a coalition on real estate investment and facilitate real estate price appreciation. The above theoretical model is empirically evidenced with VAR (Vector Auto Regression) methodology. A panel VAR model shows that land leasing and real estate price appreciation positively affect local government general fiscal revenue. Additional VAR models find that bank credit in addition to private and foreign funds respectively have strong positive dynamic effects on housing prices. Housing prices also have a strong positive impact on speculation from private funds and hot money.

Suggested Citation

  • Fengyun Liu & Shuji Matsuno & Reza Malekian & Jin Yu & Zhixiong Li, 2016. "A Vector Auto Regression Model Applied to Real Estate Development Investment: A Statistic Analysis," Sustainability, MDPI, vol. 8(11), pages 1-19, October.
    • Handle: RePEc:gam:jsusta:v:8:y:2016:i:11:p:1082-:d:81340
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    Cited by:

    1. Lihe Tu & Emanuele Padovani, 2018. "A Research on the Debt Sustainability of China’s Major City Governments in Post-Land Finance Era," Sustainability, MDPI, vol. 10(5), pages 1-21, May.
    2. Shengfu Yang & Shougeng Hu & Weidong Li & Chuanrong Zhang & José A. Torres, 2017. "Spatiotemporal Effects of Main Impact Factors on Residential Land Price in Major Cities of China," Sustainability, MDPI, vol. 9(11), pages 1-16, November.
    3. Zhangcheng Chen & Yueming Hu & Chen Jason Zhang & Yilun Liu, 2017. "An Optimal Rubrics-Based Approach to Real Estate Appraisal," Sustainability, MDPI, vol. 9(6), pages 1-19, May.
    4. Jaromir Vrbka & Tomas Krulicky & Tomas Brabenec & Jan Hejda, 2020. "Determining the Increase in a Building’s Appreciation Rate Due to a Reconstruction," Sustainability, MDPI, vol. 12(18), pages 1-13, September.
    5. Jiangtao Li & Jianyue Ji & Huiwen Guo & Lei Chen, 2018. "Research on the Influence of Real Estate Development on Private Investment: A Case Study of China," Sustainability, MDPI, vol. 10(8), pages 1-17, July.
    6. Fengyun Liu & Chuanzhe Liu & Honghao Ren, 2018. "Urban Housing Price Fluctuations and Regional Systemic Financial Risks: Panel Spatial Economic Models in Jiangsu, China," Sustainability, MDPI, vol. 10(10), pages 1-17, September.

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