An Empirical Research On Volatility Characteristics Of Urban House Prices In China

With the deepening of the housing distribution system and the healthy development of the national economy, the real estate industry has been developed quickly, which has been an important part of the national economy. Therefore, price fluctuations of the housing market will not only affect the people's living quality and living standard, but also affect the development of the national economy and social harmony and stability. In recent years, China's price fluctuations show two obvious features. First, the cities in the same region have the similar house price fluctuations. For example, the house price fluctuations of four cities in East China (Shanghai, Nanjing, Ningbo, Hangzhou) have almost maintained the same trend from late 2004. Second, China's regional urban price fluctuations have relationships of one after another. From 2000 to 2004, the house prices of developed coastal cities increased quickly, and then the house prices of the second and third tier cities in inland began to increase in 2006. In 2005, the government had adopted a series of macro-control policies, so Yangtze River Delta (Shanghai, Hangzhou, etc.) have some control over house prices. But with the new round of growth of house prices in Beijing and Shenzhen in 2006, the house prices in Yangtze River Delta region appeared sharp price rise in 2007. Based on the above characteristics, the paper will mainly study the price fluctuations characteristics of the regional market and investigate the interaction relationships of housing prices among regions and cities.This paper uses a large monthly date set of real estate price index that covers 26 big cities in China from 1999:01 to 2010:05 to conduct the empirical analysis. First, 26 cities will be divided into six regions based on the feature of house price fluctuations, and then we carry out the empirical analysis, which has two parts. First, we study the house price volatility characteristics of single regions and cities. We use the dynamic factor model to extract the regional factors and urban factors, based on which we study the house price volatility characteristics of every region and every city. We also conduct a variance decomposition analysis in this part Second, we study the relationships of price fluctuations between different regions and cities using co-integration tests and granger causality tests.The results of the dynamic factor model show that price volatility characteristics of each city can be broken down into urban and regional factors, which are different in different cities. The results of variance decomposition show that every regional factor has great contribution to the house price fluctuations in the cities of this region, especially in the developed regions. The tests on the interactional relationships among regions'house prices and among cities'house prices of one same region show that house price fluctuations in our country exist "ripple effect", which is difused from eastern coastal developed regions to northeast, central and western regions. Based on these tests, we also find northeast and western cities' house prices change at the same times, but the central cities doesn't.