Download This PaperA Tale of Two Countries: Comparing the US and Chinese Housing Markets
Lai, Rose Neng and Robert A. Van Order. (2020). A Tale of Two Countries: Comparing the US and Chinese Bubbles Housing Markets, Journal of Real Estate Finance and Economics, 61(3), 505-547.
47 Pages Posted: 4 Aug 2018 Last revised: 9 Feb 2021
Date Written: July 15, 2018
Abstract
The recent surge in property values in China has been similar to the surge in the U.S before the crash in 2007. This raises concerns about whether China is destined to have a crash as well. We estimate similar models of property values for the two countries, in order to compare price dynamics side by side. We find little in common between them. In the U.S. the adjustment process appears prone to “bubbles” in the sense of strong momentum, but Chinese prices have been generally mean reverting, without momentum. This suggests that the recent price rise in China has had more to do with scarcity than with irrational exuberance.
Keywords: Chinese Housing Market, US Housing Market, Bubbles, Momentum, (Pooled) Mean Group Estimation
JEL Classification: C23, R21, R31, R38
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