Dissecting the Heterogeneity of China's Regional Housing Markets

Using data from 29 regional housing markets in China, we estimate the long-run relationship between housing prices and key macroeconomic variables. Our findings suggest that the conventional cointegration framework can be misleading, as the estimated coefficients often contradict standard demand and supply theory even when statistical tests confirm the presence of cointegration. Among the variables considered, only real income consistently explains regional housing price dynamics. In contrast, factors such as the real interest rate and real building cost fail to account for price movements in a consistent manner across regions. We identify region-specific models that are both statistically valid and economically meaningful, revealing substantial heterogeneity across markets. These results call for more tailored, region-specific housing policies rather than uniform national strategies.