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House Market in Chinese Cities: Dynamic Modeling, In0 Sample Fitting and Out-of- Sample Forecasting

Author

Listed:
  • Charles Ka Yui Leung

    (kycleung@cityu.edu.hk.)

  • Kenneth K. Chow

    (Hong Kong Institute for Monetary Research)

  • Matthew S. Yiu

    (Hong Kong Monetary Authority)

  • Dickson C. Tam

    (China International Capital Corporation Limited)

Abstract

This paper attempts to contribute in several ways. Theoretically, it proposes simple models of house price dynamics and construction dynamics, all based on the maximization problems of forward-looking agents, which may carry independent interests. Simplified versions of the model implications are estimated with the data from four major cities in China. Both price and construction dynamics exhibit strong persistence in all cities. Significant heterogeneity across cities is found. Our models out-perform widely used alternatives in in-sample-fitting for all cities, although similar success is only limited to highly developed cities in out-of-sample forecasting. Policy implications and future research directions are also discussed.

Suggested Citation

  • Charles Ka Yui Leung & Kenneth K. Chow & Matthew S. Yiu & Dickson C. Tam, 2011. "House Market in Chinese Cities: Dynamic Modeling, In0 Sample Fitting and Out-of- Sample Forecasting," International Real Estate Review, Global Social Science Institute, vol. 14(1), pages 85-117.
    • Handle: RePEc:ire:issued:v:14:n:01:2011:p:85-117
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    References listed on IDEAS

    as
    1. Baxter, Marianne, 1991. "Business cycles, stylized facts, and the exchange rate regime: evidence from the United States," Journal of International Money and Finance, Elsevier, vol. 10(1), pages 71-88, March.
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    Citations

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    Cited by:

    1. Charles Ka Yui Leung & Joe Cho Yiu Ng, 2018. "Macro Aspects of Housing," GRU Working Paper Series GRU_2018_016, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    2. Xing Su & Zhu Qian, 2020. "State Intervention in Land Supply and Its Impact on Real Estate Investment in China: Evidence from Prefecture-Level Cities," Sustainability, MDPI, vol. 12(3), pages 1-15, January.
    3. Ying Fan & Charles Ka Yui Leung & Zan Yang, 2022. "Financial conditions, local competition, and local market leaders: The case of real estate developers," Pacific Economic Review, Wiley Blackwell, vol. 27(2), pages 131-193, May.
    4. Gregory C. Chow & Linlin Niu, 2015. "Housing Prices in Urban China as Determined by Demand and Supply," Pacific Economic Review, Wiley Blackwell, vol. 20(1), pages 1-16, February.
    5. Charles Ka Yui Leung & Joe Cho Yiu Ng & Edward Tang, 2020. "Why is the Hong Kong Housing Market Unaffordable? Some Stylized Facts and Estimations," Globalization Institute Working Papers 380, Federal Reserve Bank of Dallas.
    6. 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.
    7. Leung, Charles Ka Yui & Ng, Joe Cho Yiu & Tang, Edward Chi Ho, 2019. "What do we know about Housing Supply? The case of Hong Kong," MPRA Paper 93510, University Library of Munich, Germany.
    8. Yum K. Kwan & Jinyue Dong, 2014. "Stock Price Dynamics of China: What Do the Asset Markets Tell Us About the Chinese Utility Function?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(03), pages 77-108, May.

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    More about this item

    Keywords

    Pre-sale; Production constraint; Collateral constraint; Cross-city heterogeneity; Fundamental versus policy;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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    Access and download statistics

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