Property Market and the Macroeconomy of Mainland China: A Cross Region Study

Abstract

This paper studies the nexus between the property market and macroeconomy of China in 1998-2004, using panel data models covering 31 provinces and major cities. The estimates suggest three main conclusions. First, there seemed to be a two-way linkage between property prices and GDP growth. Second, bank credit expansion did not seem to play an 'accelerating' role in property price inflation, although the latter is found to have contributed to bank credit increases in recent years. Third, property price growth may have deviated from fundamentals in coastal areas, as evidenced by a negative relationship between housing and rental prices. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd

Do bank loans and local amenities explain Chinese urban house prices?

“…This perception increases financial institutions' risk-taking capacity and their willingness to extend credit, so they pour more loans into the economy. Supporting empirical research of such a cause and effect link from house prices to credit volume includes studies by Gerlach and Peng (2005) and Peng et al (2008) …”

“…Their cointegration analysis suggests that the property prices in Hong Kong are weakly exogenous, and the causality goes from property prices to bank loans. Peng et al (2008) investigate the relationship between the property market and the macroeconomy in mainland China from 1998 15 PM 2.5 measures the number of tiny particles with diameters less than 2.5 micrometers. Such particulate matters can enter deep into human lungs and cause potential cardiovascular and respiratory diseases.…”

“…Wang, Yang, and Liu (2011) inspect how economic openness affects real estate prices. Cao (2007), Liang andGao (2007), Peng et al (2008), Zhang, Gong, and Bu (2006) contribute to the topic of interaction between bank lending and property market. However, these articles carry out their investigation at the national or provincial level.…”

The Impacts of Housing Affordability on Social and Economic Sustainability in Beijing

“…The increase of housing wealth can promote household consumption, which also contributes to economic growth (Edelstein and Lum 2004). However, Peng et al (2008) pointed out that there was a lack of wealth effect on consumption in China, mainly owing to the limited means to withdraw housing equity to finance current consumption. This is shared by Ouyang (2011) who pointed out that, due to the housing affordability crisis, many people in China reduce entertainment spend and careful calculation in daily expenditure in order to set aside money for down payment or mortgage payment.…”

“…Hongyu et al (2002) found that the growth of housing investment in China contributed to GDP growth in the short run. Also, Peng et al (2008) and Chen et al (2011) found that property price inflation brought about real GDP growth in China mainly through the investment channel. However, Jin-hai (2009) have shown that overheated investment would result in unbalanced economics structure (Jin-hai 2009), and hence gave rise to instability of housing market, which will eventually affect the economic development (Clapham 1996;Beltratti and Morana 2010).…”