Study On The Determinants And Relationship Between China's Urban Housing Prices And Rents

Under the double powers of the rapid urbanization and the transition of market, China's urban housing market has been booming in recent decades. However, the special relationship between urban housing prices and housing rents has become a serious social phenomenon in China. A large number of theoretical researchers have paid close attention to this issue, that most of them try to explain the reason for the" imbalance between China's urban housing market and the housing rental market, not the really reason for the divergence between the housing prices and housing rents. Therefore, this research proposes to explain the deviation relationship between China's urban housing prices and housing rents from the "factors'view", that is precisely because the key factors for China's urban housing prices and housing rents are vary, resulting housing prices and housing rents change differently in the same environment. Thus, the short-term and long-term relationship between China's urban housing prices and housing rents are very special.Based on the full exposition of the essence of China's urban housing prices and housing rents problem, the author read a lot of domestic and international existing research literatures on the issue of urban housing prices and housing rents, and made a scientific summary on this literatures—divide the different theory analysis framework into "the single market theory", "the double markets theory" and "the integral markets theory". Meanwhile, the practice of China's urban housing market is analyzed in-depth in this paper. The most specific feature of the dual structure of China's urban housing market is the "inconsistent on clients, inconsistent on pace of development, and inconsistent on the manifest of housing value". The reading of literatures and the analysis of environment are order to laid a solid theory and practical foundation for the continue study.Based on the well-prepare of the above theoretical background and practical background, two important questions needed to be answered from the "factors'view" perspective in this paper. First, what are the key factors each for China's urban housing prices and housing rents? Second, how are the short-term and long-term relationship between China's urban housing prices and housing rents? Four empirical studys were arranged to answer these questions, in all of which the panel data of year 2003-2008 for 35 large and medium cities were used. Both of ChapterⅣand ChapterⅤused STATA10.0 software for carrying out the fixed panel model regression analysis, identifing each key factors for the urban housing prices and housing rents. ChapterⅥused Eviews 6.0 software for carrying out unit root test, cointegration and error correction model analysis respectively, positiving out of the short-term relationship between China's urban housing prices and housing rents in performance. ChapterⅦused Eviews6.0 software for carrying out the two-stage least squares analysis for the simultaneous equations model of housing prices and housing rents, positiving out of the long-term relationship between China's urban housing prices and housing rents. Through the theoretical and empirical analysis, this paper draws the following main conclusions:(1) The key factors for China's urban housing prices and housing rents are both overlap and significant different. Both the demanded-class and supplied-class factors affect the housing prices. There are 6 demanded-class factors, which are housing rents, growth rate of house prices, natural population growth rate, per capita GDP, greenbelt rate, employment rate. There are 5 supplied-class factors, which are the price of land categories, housing costs to completion, the amount of residential investment, residential area completed and the land acquisition area. However, the main factors for the housing rents are main the demanded-class factors, which are housing prices, growth rate of housing price, fixed asset investment, the proportion of non-household population, the average wage of workers, per capita GDP, GDP, the proportion of tertiary industry and the number of industrial quantity enterprises. The combinations of key factors for China's urban housing prices and housing rents are different, resulting in the different reflection of housing prices and housing rents in the same environment. In China's particular environment system, some special factors role unnormaly, which affect both the housing prices and housing rents, such as the expected growth of housing prices, resulting in China's urban housing prices run wildly out of the basic capital value of the housing rents.(2) On the short term, the housing prices and housing rents are exogenous factors for each other in the framework of dual-market theory. Symmetry relationship between China's urban housing prices and housing rents was found, that the change in housing prices could due to the change in housing rents, and the change in housing rents could also cause the change in housing prices. Specifically speaking, the most important factors for housing prices in the short-term are the housing prices in the last year and the housing rents in the same year, and the most important factors for housing rents in the short-term are the housing rents in the last year, the housing prices two years before and the housing prices in the same year. This conclusion of the short-term impact between housing prices and housing rents is in line with the observation of the reality. That is, China's urban housing prices and housing rents interact with each other in the short term. However, each of them has different power source, due to the different fluctuating trends they have, resulting in the great differences in gains and size between them on the short term.(3) On the long term, the housing prices and housing rents are endogenous factors for each other in the framework of integral-market theory. One-way relationship between housing prices and housing rents was found, that the housing prices are the significant long-tern causes for the housing rents, but the housing rents are not the significant long-tern causes for the housing prices. In particular, housing prices rose for every 1 yuan/square meter, the monthly housing rent will be increased accordingly 0.0017 yuan/square meter. This long-term impact relationship between the housing prices and housing rents was significant by the statistical tests, that housing prices are the significant long-term causes for housing rents. At the same time, monthly housing rents per increase of 1 yuan/square meter, the housing prices will rise accordingly 28.41 yuan/square meter. However, This long-term effects relationship between the housing prices and housing rents are not significant by statistical tests. Namely, housing rents was not the significant long-term causes for housing prices. This conclusion of the one-way relationship between housing prices and housing rents is good agreement with the observed in reality,that in the long term, the housing prices are gradually away from the basic value of rental housing capital. This leading to price earnings ratio and price rent ratios are significantly more than the value of international experience.(4) There is a special deeper institutional cause under the deviation between China's urban housing prices and housing rents. The truth reason may be that the increasing wealth of our society at this stage leads to increasing residents'investment demand, and then leads to excessive concentration of capital in the property market because the current financial system is not fully developed in China. Therefore, the next step to guide the coordinated development of China's urban housing prices and housing rents are two possible measures. Firstly, open up the channels of personal investment to further improve the China's financial market system. Secondly, guide the steady development and further coordination between China's urban housing market and the housing rental market.Compared with the existing research results, this paper has main academic value and innovation in the following areas:(1) The proposion of "factors'view" perspective will help researchers to improve the understanding of China's urban housing prices and housing rents. Most of the existing mainstream researchs try to explain the imbalance between housing trading market and housing rental market, but not really explain the deviation between housing prices and housing rents. The proposion of "factors'view" perspective can promote the research in this field advancely and deeply from the "indirect interpretation of the market prices" to "factors directly explain the market prices".(2) The use of panel data model respectively to identify the key factors for the urban housing prices and housing rents, not only to strengthen the empirical study of housing prices, but also to fill China's research gaps on house rents factors. There are very few studies on identifing factors for urban housing rents. This paper not only uses a better empirical method, but also fills the blank for the lack of theoretical study on urban housing rents in China.(3) The first time to identify the short-term relationship between the urban housing prices and housing rents using the the city level panel data. Most of the China's Study used the national housing price index to obtain to short-term relationship between the urban housing prices and housing rents, which obtained very different conclusions. The national housing price index has two shortings, not exactly reflecting the cities'phenomonen and not instead of the price level perfectly. The innovative use of urban panel data would promote the related researchs.(4) The first time to consider the housing prices and housing rents as endogenous factors for each other in the "integral markets theory" framework, and to indentify the long-term relationship between China's urban housing prices and housing rents. Most of the existing domestic empirical studies make the housing prices and housing rents as exogenous factors for each other when identifying the relationship between them. In this study, urban housing prices and housing rents simultaneous equations model was built, promoting the empirical research from the "exogenous" to "endogenous".