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

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  • Leung, Charles Ka Yui
  • Chow, Kenneth
  • Yiu, Matthew
  • Tam, Dickson

Abstract

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

Suggested Citation

  • Leung, Charles Ka Yui & Chow, Kenneth & Yiu, Matthew & Tam, Dickson, 2010. "House Market in Chinese Cities: Dynamic Modeling, In-Sampling Fitting and Out-of-Sample Forecasting," MPRA Paper 27367, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27367
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    2. Yan Dong & Charles Ka Yui Leung & Dongliang Cai, 2012. "What Drives Fixed Asset Holding and Risk- Adjusted Performance of Corporates in China? An Empirical Analysis," International Real Estate Review, Global Social Science Institute, vol. 15(2), pages 141-164.
    3. 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.

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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:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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