Housing Price and Fundamentals in a Transition Economy: The Case of the Beijing Market

69 Pages Posted: 25 Sep 2015 Last revised: 26 Mar 2017

See all articles by Bing Han

Bing Han

University of Toronto, Rotman School of Management

Lu Han

University of Toronto - Rotman School of Management

Guozhong Zhu

University of Alberta - Alberta School of Business

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Date Written: September 23, 2015

Abstract

This paper develops a dynamic rational expectations general equilibrium framework that links house value to fundamental economic variables such as income growth, demographics, migration and land supply. Our framework is general and can handle non-stationary dynamics as well as structural changes in fundamentals that are commonplace in transition economies. Applying the framework to Beijing, we find that the equilibrium house price and rent under reasonable parametrizations of the model are substantially lower than the data. We explore potential explanations for the discrepancies between the model and the data.

Keywords: housing price, fundamentals, transition economy, dynamic equilibrium, life-cycle overlapping generations model

JEL Classification: E20, E30, R10, R13, R21, R31

Suggested Citation

Han, Bing and Han, Lu and Zhu, Guozhong, Housing Price and Fundamentals in a Transition Economy: The Case of the Beijing Market (September 23, 2015). Rotman School of Management Working Paper No. 2664817. Available at SSRN: https://ssrn.com/abstract=2664817 or http://dx.doi.org/10.2139/ssrn.2664817

Bing Han (Contact Author)

University of Toronto, Rotman School of Management ( email )

Toronto, Ontario M5S 3E6
Canada
4169460732 (Phone)

Lu Han

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Guozhong Zhu

University of Alberta - Alberta School of Business ( email )

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