Are there Irrational Bubbles under the High Residential Housing Prices in China’s Major Cities?

Abstract

House prices in the main cities of China have been rising to historically high levels. Unsustainable growth of housing prices might cause financial crises and damage the whole economy. This research aims to detect whether bubbles dominate China’s real estate market. It begins by systematically analysing the features of China’s real estate sector, followed by proposing a theoretical framework to identify the fundamentals of house prices and decompose house prices into cyclical and bubble components. It then applies the vector error correction model and other econometric techniques to testify the theoretical framework with data of seven Chinese cities from 2008M01 to 2017M12. The main findings of this research include the following four parts. Firstly, the residential housing market of Shanghai was exposed to the irrational bubble issue, but the rest six cities examined were at safe positions. Secondly, both long-run and short-run relationships between economic fundamentals and house prices have been verified. Thirdly, economic regulations also have significant effects on house prices. Finally, this research suggests that the root cause of the high housing prices in major cities in China is due to the excessive capital injection into the residential property market.

Key words: China, House prices, Housing bubbles, Political adjustment, Real estate market, Macroeconomics.

JEL: G15, G21, R11, R21, R31.

Postoje li neracionalni mehuri pod visokim cenama stambenog smeštaja u većim gradovima Kine?

Cene kuća u glavnim gradovima Kine popele su se na istorijski visoke nivoe. Neodrživi rast cena stanova mogao bi izazvati finansijske krize i naneti štetu ekonomiji kao celini. Ovo istraživanje ima za cilj da utvrdi da li mehuri dominiraju kineskim tržištem nekretnina. Počinjemo sistematskom analizom karakteristika kineskog sektora nekretnina, nakon čega predlažemo teorijski okvir za identifikaciju osnova cena kuća i dekompoziciju cena kuća na ciklične komponente i mehure. Zatim primenjujemo model vektorske korekcije grešaka i druge ekonometrijske tehnike za proveru teorijskog okvira sa podacima o sedam kineskih gradova od 2008M01 do 2017M12. Glavni rezultati ovog istraživanja uključuju sledeća četiri dela. Prvo, tržište stambenih stanova u Šangaju bilo je izloženo problemu iracionalnih mehura, ali ostalih šest pregledanih gradova bilo je na sigurnim pozicijama. Drugo, provereni su i dugoročni i kratkoročni odnosi između ekonomskih osnova i cena kuća. Treće, ekonomski propisi takođe imaju značajan uticaj na cene kuća. Konačno, ovo istraživanje sugeriše da je glavni uzrok visokih cena stanova u većim gradovima Kine rezultat prevelikog ulaganja kapitala na tržištu nekretnina.

Ključne reči: Kina, cene kuća, mehuri na tržištu nekretnina, političko prilagođavanje, tržište nekretnina, makroekonomija.