Is There a Housing Bubble in China?

23 Pages Posted: 11 Jan 2018

See all articles by Tianhao Zhi

Tianhao Zhi

Business School, Sun Yat-sen University; Sun Yat-Sen University (SYSU)

Zhongfei Li

Sun Yat-sen Business School, Sun Yat-sen University

Zhi-Qiang Jiang

East China University of Science and Technology (ECUST)

Lijian Wei

Business School of Sun Yat-sen Univerisity; Financial Research Network (FIRN)

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute

Date Written: January 8, 2018

Abstract

There is a growing concern in recent years over the potential formation of bubbles in the Chinese real estate market. This paper aims to conduct a series of bubble diagnostic analysis over nine representative Chinese cities from two aspects. First, we investigate whether the prices had been significantly deviating from economic fundamentals by applying a standard Engle-Granger cointegration test. Second, we apply the Log-Periodic-Power-Law-Singularity (LPPLS) model to detect whether there is any evidence of unsustainable, self-reinforcing speculative behaviours amongst the price series. We propose that, given the heterogeneity that exists amongst cities with different types of bubble signatures, it is vital to conduct bubble diagnostic tests and implement relevant policies toward specific bubble characteristics, rather than enforcing one-that-fits-for-all type policy that does not take into account such heterogeneity.

Keywords: housing bubble, Log-Period-Power-Law-Singularity, bubble prediction, the Chinese real estate market

JEL Classification: F37, G01, G17

Suggested Citation

Zhi, Tianhao and Li, Zhongfei and Jiang, Zhi-Qiang and Wei, Lijian and Sornette, Didier, Is There a Housing Bubble in China? (January 8, 2018). Available at SSRN: https://ssrn.com/abstract=3098064 or http://dx.doi.org/10.2139/ssrn.3098064

Tianhao Zhi

Business School, Sun Yat-sen University ( email )

Guangzhou, Guangdong
China

Sun Yat-Sen University (SYSU) ( email )

Guangzhou, Guangdong
China

Zhongfei Li

Sun Yat-sen Business School, Sun Yat-sen University ( email )

No. 135, West Xingang Road
Guangzhou
China

Zhi-Qiang Jiang

East China University of Science and Technology (ECUST) ( email )

Shanghai
China

Lijian Wei (Contact Author)

Business School of Sun Yat-sen Univerisity ( email )

Guangzhou, Guangdong
China
+86 20 84110551 (Phone)

HOME PAGE: http://bus.sysu.edu.cn/Teacher/ShowTeacher.aspx?tid=338

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC) ( email )

Scheuchzerstrasse 7
Zurich, ZURICH CH-8092
Switzerland
41446328917 (Phone)
41446321914 (Fax)

HOME PAGE: http://www.er.ethz.ch/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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