Mapping China's Time-Varying House Price Landscape

33 Pages Posted: 12 Dec 2017 Last revised: 18 Nov 2021

See all articles by Michael Funke

Michael Funke

University of Hamburg - Department of Economics; Tallinn University of Technology (TUT)

Danilo Leiva-Leon

Central Bank of Chile

Andrew Tsang

ASEAN+3 Macroeconomic Research (AMRO)

Multiple version iconThere are 2 versions of this paper

Date Written: December 9, 2017

Abstract

The recent increase in China’s house prices at the national level masks tremendous variation at the city level – a feature largely overlooked in the macroprudential literature. This paper considers the evolving heterogeneity in China’s house price dynamics across 70 cities and assess the main deter-minants. We gauge the heterogeneity of house price dynamics using a novel regime-switching modelling approach to estimate the time-varying patterns of China’s city-level housing price synchronization. After sorting city-level housing prices into four clusters sharing similar cyclical features, we see that each group shows increasing synchronization in the years leading up to 2015, and a decoupling pattern thereafter. We document high synchronization within each of the clusters of cities, but low synchronization among them. The empirical evidence suggests that differentials in the growth of households, income, investment and even differences in air quality explain housing price synchronization among cities.

Keywords: house prices, Markov-Switching models, synchronization, China

JEL Classification: E31, E32, C32

Suggested Citation

Funke, Michael and Leiva-Leon, Danilo and Tsang, Andrew, Mapping China's Time-Varying House Price Landscape (December 9, 2017). BOFIT Discussion Paper No. 21/2017, Available at SSRN: https://ssrn.com/abstract=3085844

Michael Funke (Contact Author)

University of Hamburg - Department of Economics ( email )

Von-Melle-Park 5
room 2128 C rise
Hamburg, 20146
Germany

Tallinn University of Technology (TUT) ( email )

Ehitajate tee 5
Tallinn, 12618
Estonia

Danilo Leiva-Leon

Central Bank of Chile ( email )

Research Department
Huerfanos 1185
Santiago
Chile

Andrew Tsang

ASEAN+3 Macroeconomic Research (AMRO) ( email )

10 Shenton Way #15-08
MAS Building
Singapore, Singapore 079117
Singapore

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