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Housing_price - The Emerald Research Register for this...

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Housing price bubbles in Beijing and Shanghai Yue Shen Institute of Real Estate Studies, Tsinghua University, Beijing, People’s Republic of China Eddie Chi-man Hui Department of Building and Real Estate, Hong Kong Polytechnic University, Hong Kong, People’s Republic of China, and Hongyu Liu Institute of Real Estate Studies, Tsinghua University, Beijing, People’s Republic of China Abstract Purpose – This study investigates whether there was a housing price bubble in Beijing and Shanghai in 2003. The existence of a bubble can be interpreted from (abnormal) interactions between housing prices and market fundamentals. Design/methodology/approach – With monthly data from the two cities, this paper employs standard econometric methodologies: i.e. Granger causality tests and generalized impulse response analysis, and the reduced form of housing price determinants. Findings – Our findings suggest that there appeared a bubble in Shanghai in 2003, accounting for 22 percent of the housing price. By contrast, Beijing had no sign of a bubble in the same year. The bubble phenomenon, of course, should not be taken without caution for the constraints of data. Nonetheless, this study has laid the ground work for further investigation into abnormal housing price phenomena in Mainland China. Originality/value – Our findings may help foreign investors better understand the Chinese housing markets and make better housing investment decisions in the two cities. Keywords Economic conditions, China, Housing, Investments Paper type Research paper 1. Introduction Over the last two decades, China has achieved rapid economic growth, accompanied with rapid development of the real estate market. Although the Asian financial crisis damaged the real estate markets in Southeast and East Asia, it had little impact on the real estate market in Beijing and Shanghai. As a result of rapid economic growth and urbanization, demands for urban land and new dwellings have increased rapidly, leading to rapid growth of housing prices. For example, Shanghai Housing Price Index (SHHPI) in the China Real Estate Index System (CREIS) was only 656 points in January 2001 and rose 63 percent to 1084 points in December 2003. The fluctuations in housing prices not only affect the fortunes of many corporations and households but also play an important role in the macroeconomic level. Changes in housing prices would generate or reinforce fluctuations in the economy in a wider context. To keep a reasonable relationship between housing prices and the macroeconomy is of great importance. We have seen the Japanese land price bubble The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at www.emeraldinsight.com/researchregister www.emeraldinsight.com/0025-1747.htm Housing price bubbles 611 Management Decision Vol. 43 No. 4, 2005 pp. 611-627 q Emerald Group Publishing Limited 0025-1747 DOI 10.1108/00251740510593594
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and the Asian financial crisis in recent years and the property markets were badly affected. No doubt, the recent housing price boom has drawn much attention in China.
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