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Housing Price in Urban China as Determined by Demand and Supply

Author

Listed:
  • Gregory Chow

    (Princeton University)

  • Linlin Niu

    (Xiamen University)

Abstract

This paper studies the demand for and supply of residential housing in urban China since the late 1980s when the urban housing market became commercialized. Using aggregated annual data from 1987 to 2012 in a simultaneous equations framework we show that the rapid increase in the urban residential housing price can be well explained by the forces of demand and supply, with income determining demand and cost of construction affecting supply. We find the income elasticity of demand for urban housing to be about 1, the price elasticity of demand about -1.1, and the price elasticity of supply of the total housing stock about 0.5. The resulting long-run effect of income on urban housing price in elasticity terms is about 0.7, because the increase in income has shifted the demand curve outward more rapidly than the supply curve.

Suggested Citation

  • Gregory Chow & Linlin Niu, 2015. "Housing Price in Urban China as Determined by Demand and Supply," WISE Working Papers 2015-03-09, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  • Handle: RePEc:wyi:wpaper:002251
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    References listed on IDEAS

    as
    1. Zhang, Yanbing & Hua, Xiuping & Zhao, Liang, 2012. "Exploring determinants of housing prices: A case study of Chinese experience in 1999–2010," Economic Modelling, Elsevier, vol. 29(6), pages 2349-2361.
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    10. Yongheng Deng & Joseph Gyourko & Jing Wu, 2012. "Land and House Price Measurement in China," NBER Working Papers 18403, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Wei Tian & Liugang Sheng & Hongyan Zhao, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 84-101, February.
    2. repec:gam:jsusta:v:9:y:2017:i:8:p:1445-:d:108516 is not listed on IDEAS
    3. Weizeng Sun & Siqi Zheng & Yuming Fu, 2016. "Local Public Service Provision and Spatial Inequality in Chinese Cities," ERSA conference papers ersa16p799, European Regional Science Association.
    4. Feng, Qu & Wu, Guiying Laura, 2015. "Bubble or riddle? An asset-pricing approach evaluation on China's housing market," Economic Modelling, Elsevier, vol. 46(C), pages 376-383.
    5. Liu, Chunping & Ou, Zhirong, 2017. "What determines China's housing price dynamics? New evidence from a DSGE-VAR," Cardiff Economics Working Papers E2017/4, Cardiff University, Cardiff Business School, Economics Section.
    6. repec:eee:regeco:v:67:y:2017:i:c:p:1-10 is not listed on IDEAS

    More about this item

    Keywords

    housing demand; housing supply; urban housing price; China;

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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