scholarly journals Club convergence of house prices: Evidence from China’s ten key cities

2015 ◽  
Vol 29 (24) ◽  
pp. 1550181 ◽  
Author(s):  
Hao Meng ◽  
Wen-Jie Xie ◽  
Wei-Xing Zhou

The latest global financial tsunami and its follow-up global economic recession has uncovered the crucial impact of housing markets on financial and economic systems. The Chinese stock market experienced a marked fall during the global financial tsunami and China’s economy has also slowed down by about 2%–3% when measured in GDP. Nevertheless, the housing markets in diverse Chinese cities seemed to continue the almost nonstop mania for more than 10 years. However, the structure and dynamics of the Chinese housing market are less studied. Here, we perform an extensive study of the Chinese housing market by analyzing 10 representative key cities based on both linear and nonlinear econophysical and econometric methods. We identify a common collective driving force which accounts for 96.5% of the house price growth, indicating very high systemic risk in the Chinese housing market. The 10 key cities can be categorized into clubs and the house prices of the cities in the same club exhibit an evident convergence. These findings from different methods are basically consistent with each other. The identified city clubs are also consistent with the conventional classification of city tiers. The house prices of the first-tier cities grow the fastest and those of the third- and fourth-tier cities rise the slowest, which illustrates the possible presence of a ripple effect in the diffusion of house prices among different cities.

2018 ◽  
Vol 21 (4) ◽  
pp. 289-301
Author(s):  
Jan R. Kim ◽  
Gieyoung Lim

The steep rise in German house prices in recent years raises the question of whether a speculative bubble has already emerged. Using a modified present-value model, we estimate the size of speculative house price bubbles in the German housing market. We do not find evidence for positive bubble accumulation in recent years, and interpret the current bullish run as reflecting the correction of house prices that have been undervalued for more than 10 years. With house prices close to their fair values as of 2018:Q1, our answer to the question is, ‘Not yet, but it is likely soon’.


2014 ◽  
Vol 7 (3) ◽  
pp. 383-396 ◽  
Author(s):  
Trond A. Borgersen

Purpose – The purpose of this paper is to compare the structure of risk and the structure of pricing in housing markets where the interaction between segments is taken into account with the structures that come about in a housing market approach that ignores this interplay. Knowing how most empirical assessments of whether housing markets are in or out of equilibrium is related to macroeconomic variables and is ignoring the interplay between segments our aim is to highlight the extent to which a homogeneous market framework underestimates pricing and risk in real housing markets. Design/methodology/approach – Framed in terms of a linearized housing market with two segments, the author derives expressions for house prices and house price risk in three scenarios. The author compares the structure of pricing and the structure of risk in a homogeneous housing market with those of two distinct heterogeneous housing markets where segments are linked as well analyzing as how prices and risk responds to shocks. Findings – The author derives expressions for market segment prices and for the house price index in three distinct housing market scenarios and shows how heterogeneous housing market frameworks produce both expressions for house prices and for house price risk, as well as a response in both risk and prices to shocks to demand, that deviate from those of a homogeneous housing market framework. While significantly underestimating house price risk a homogeneous framework might also be taken by surprise of the price response accompanying shocks to demand. Originality/value – The authors' simplistic expressions for house prices and house price risk provides a framework for bringing two distinct theoretical housing market camps onto the same playing field. The approach shows the value added of taking the interplay between market segments into account when analyzing housing market developments.


2018 ◽  
Vol 10 (2) ◽  
pp. 167
Author(s):  
Calvin W. H. Cheong ◽  
Lisa L. H. Ngui ◽  
Shella Georgina Beatrice

This paper examines the factors that drive the recent exponential growth in Malaysian house prices. We first construct a sentiment index for the housing market in Malaysia guided by the methods employed by Baker and Wurgler (2006). Preliminary analyses of our bias-free sentiment index indicate a strong correlation with overall market confidence which attests to the reliability of our index. The results also show contemporaneous sentiment to strongly influence future housing market returns especially in the short-term. Contrary to the literature, our results suggest that it is property developer behaviour that drive sentiments and property prices. The study contributes to the literature by providing an easily generalizable method of constructing a housing market sentiment index in other countries that holistically accounts for essential housing market elements that are otherwise ignored in confidence indices. This study also contributes to practice as it provides evidence to policy-makers who wish to cool property markets may want to design interventions that are targeted at property developers instead of home-buyers or speculators.


2017 ◽  
Vol 10 (3) ◽  
pp. 331-345 ◽  
Author(s):  
Alfred Larm Teye ◽  
Michel Knoppel ◽  
Jan de Haan ◽  
Marja G. Elsinga

Purpose This paper aims to examine the existence of the ripple effect from Amsterdam to the housing markets of other regions in The Netherlands. It identifies which regional housing markets are influenced by house price movements in Amsterdam. Design/methodology/approach The paper considers the ripple effect as a lead-lag effect and a long-run convergence between the Amsterdam and regional house prices. Using the real house prices for second-hand owner-occupied dwellings from 1995q1 to 2016q2, the paper adopts the Toda–Yamamoto Granger Causality approach to study the lead-lag effects. It uses the autoregressive distributed lags (ARDL)-Bounds cointegration techniques to examine the long-run convergence between the regional and the Amsterdam house prices. The paper controls for house price fundamentals to eliminate possible confounding effects of common shocks. Findings The cumulative evidence suggests that Amsterdam house prices have influence on (or ripple to) all the Dutch regions, except one. In particular, the Granger Causality test concludes that a lead-lag effect of house prices exists from Amsterdam to all the regions, apart from Zeeland. The cointegration test shows evidence of a long-convergence between Amsterdam house prices and six regions: Friesland, Groningen, Limburg, Overijssel, Utrecht and Zuid-Holland. Research limitations/implications The paper adopts an econometric approach to examine the Amsterdam ripple effect. More sophisticated economic models that consider the asymmetric properties of house prices and the patterns of interregional socio-economic activities into the modelling approach are recommended for further investigation. Originality/value This paper focuses on The Netherlands for which the ripple effect has not yet been researched to the authors’ knowledge. Given the substantial wealth effects associated with house price changes that may shape economic activity through consumption, evidence for ripples may be helpful to policy makers for uncovering trends that have implications for the entire economy. Moreover, the analysis controls for common house price fundamentals which most previous papers ignored.


Author(s):  
Noemi Schmitt ◽  
Frank Westerhoff

AbstractWe propose a novel housing market model to explore the effectiveness of rent control. Our model reveals that the expectation formation and learning behavior of boundedly rational homebuyers, switching between extrapolative and regressive expectation rules subject to their past forecasting accuracy, may create endogenous housing market dynamics. We show that policymakers may use rent control to reduce the rent level, although such policies may have undesirable effects on the house price and the housing stock. However, we are also able to prove that well-designed rent control may help policymakers to stabilize housing market dynamics, even without creating housing market distortions.


2021 ◽  
pp. 0308518X2198894
Author(s):  
Peter Phibbs ◽  
Nicole Gurran

On the world stage, Australian cities have been punching above their weight in global indexes of housing prices, sparking heated debates about the causes of and remedies for, sustained house price inflation. This paper examines the evidence base underpinning such debates, and the policy claims made by key commentators and stakeholders. With reference to the wider context of Australia’s housing market over a 20 year period, as well as an in depth analysis of a research paper by Australia’s central Reserve Bank, we show how economic theories commonly position land use planning as a primary driver of new supply constraints but overlook other explanations for housing market behavior. In doing so, we offer an alternative understanding of urban housing markets and land use planning interventions as a basis for more effective policy intervention in Australian and other world cities.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Daniel Lo ◽  
Michael James McCord ◽  
John McCord ◽  
Peadar Thomas Davis ◽  
Martin Haran

Purpose The price-to-rent ratio is often regarded as an important indicator for measuring housing market imbalance and inefficiency. A central question is the extent to which house prices and rents form part of the same market and thus whether they respond similarly to parallel stimulus. If they are close proxies dynamically, then this provides valuable market intelligence, particularly where causal relationships are evident. Therefore, this paper aims to examine the relationship between market and rental pricing to uncover the price switching dynamics of residential real estate property types and whether the deviation between market rents and prices are integrated over both the long- and short-term. Design/methodology/approach This paper uses cointegration, Wald exogeneity tests and Granger causality models to determine the existence, if any, of cointegration and lead-lag relationships between prices and rents within the Belfast property market, as well as the price-to-rent ratios amongst its five main property sub-markets over the time period M4, 2014 to M12 2018. Findings The findings provide some novel insights in relation to the pricing dynamics within Belfast. Housing and rental prices are cointegrated suggesting that they tend to move in tandem in the long run. It is further evident that in the short-run, the price series Granger-causes that of rents inferring that sales price information unidirectionally diffuse to the rental market. Further, the findings on price-to-rent ratios reveal that the detached sector appears to Granger-cause those of other property types except apartments in both the short- and long-term, suggesting possible spill-over of pricing signals from the top-end to the lower strata of the market. Originality/value The importance of understanding the relationship between house prices and rental market performance has gathered momentum. Although the house price-rent ratio is widely used as an indicator of over and undervaluation in the housing market, surprisingly little is known about the theoretical relationship between the price-rent ratio across property types and their respective inter-relationships.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lu Yang ◽  
Nannan Yuan ◽  
Shichao Hu

PurposeTo explore the state of this conditional Granger causality when other cities are not factors, we investigate housing market networks in China's major cities by using a combination of conditional Granger causality and network analysis.Design/methodology/approachAlthough housing market networks have been well discussed for different countries, the question of housing market networks in China's major cities based on the conditional causality perspective has yet to be answered.FindingsWe discover that second-tier cities are more influential than first-tier cities. Although the connectivity of the primary housing market is more complex than the diversified connectivity observed in the secondary housing market, both markets are scale-free networks that exhibit high stability. Moreover, we reveal that geographic conditions and economic development jointly determine the housing market's modular hierarchical structure. Our results provide meaningful information for both Chinese policymakers and investors.Originality/valueBy excluding the influence of other cities, our conditional Granger causality identifies the true casual relation between cities' housing markets. Moreover, it is the first paper to consider the primary housing market and secondary housing market separately. Specifically, Chinese prefer new house rather than second-hand house from both speculative and self-housing. Generally speaking, the new house price is lower than the second-hand house price since the new house is off-plan property. Therefore, understanding the difference between primary and secondary housing markets will provide useful information for both policymakers and speculators.


2009 ◽  
Vol 12 (3) ◽  
pp. 193-220
Author(s):  
Karol Jan Borowiecki ◽  

This paper studies the Swiss housing price determinants. The Swiss housing economy is reproduced by employing a macro- series from the last seventeen years and constructing a vector-autoregressive model. Conditional on a comparatively broad set of fundamental determinants considered, i.e. wealth, banking, demographic and real estate specific variables, the following findings are made: 1) real house price growth and construction activity dynamics are most sensitive to changes in population and construction prices, whereas real GDP, in contrary to common empirical findings in other countries, turns out to have only a minor impact in the short-term, 2) exogenous house price shocks have no long-term impacts on housing supply and vice versa, and 3) despite the recent substantial price increases, worries of overvaluation are unfounded. Furthermore, based on a self-constructed quality index, evidence is provided for a positive impact of quality improvements in supplied dwellings on house prices.


2018 ◽  
Vol 68 (3) ◽  
pp. 377-414
Author(s):  
Ádám Banai ◽  
Nikolett Vágó ◽  
Sándor Winkler

This study presents the detailed methodology of generating house price indices for the Hungarian market. The index family is an expansion of the Hungarian housing market statistics in several regards. The nationwide index is derived from a database starting from 1990, and thus the national index is regarded as the longest in comparison to the house price indices available so far. The long time series allow us to observe and compare the real levels of house prices across economic cycles. Another important innovation of this index family is its ability to capture house developments by regions and settlement types, which sheds light on the strong regional heterogeneity underlying the Hungarian housing market.


Sign in / Sign up

Export Citation Format

Share Document