Regional Housing Market Price Correlation

Nowadays the whole society has paid more attention to the housing price volatility. Institutionally, some cities, especially in some areas of central city, would play a role as leader, which is so-called "ripple effect"in the academic. When modeling the housing price, we should not ignore the effect if some region exist ripple effect. This paper begin with the housing price model in order to introduce the ripple effect, and then present the probable cause of the ripple effect with China's national conditions.Beijing Ttianjian and Hebei Province plays a key role at the economic circle around Bohai Sea. The region is closely related with politics, economy and culture, and its real market has been attention by people. However, there is little literature refer to real estate market of Beijing-Tinjin-Hebei. In this case, the paper discusses three hypotheses as follow: Hypothesis 1: the region could be regarded as a whole market, housing price converge in the long run. Hypothesis 2: as the largest economic entity, Beijing plays a central role in this region, which has influence over Tianjin and Hebei Province. Hypothesis 3: in the short turn, the housing price of the three markets whether has relative relation or independent of each other.In order to verify the first and the second hypotheses, we employed Granger Cointegration Test and Granger Causality Test. The result of Conintegration Tests manifested a fact that the housing prices in Beijing, Tianjin and Hebei has long-term convergence, which is, the price of those three places have the same trend of rise and fall. From the Granger Causality Test, the trend of housing prices fluctuation in Beijing is ahead of Tianjin and Hebei, so that we can believe that Beijing is in the center of the region, however, if analysis by statistically significant method, this center's influence is not strong. To verify the third assumption, we have adopted a VAR model and impulse response analysis. Based on the results of these two verifications, we found that the Beijing, Tianjin and Hebei are influenced a lot by their own former housing price, but Beijing has little impacts of Tianjin, Hebei, so does Hebei, while at the same time, Tianjin has slightly larger impacts of Beijing and Hebei. In order to analyze the reasons behind the numbers, we compared and analyzed economic and social development of Beijing, Tianjin and Hebei's region indicators, including GDP, regional traffic convenience, the level of urbanization, the amount of real estate investment amount, and regional economic structure. By comparing we get conclusion that the ripple effect in the Beijing-Tianjin-Hebei area exists and it not because of mutual influence for they don't have the inner relativity, but because the fact that Beijing-Tianjin's industry has being transferring to Hebei.Last but not the least, the study of price fluctuations in regions is promising and study of China's price fluctuations could be referenced by other new markets of the world. From a macro perspective, China has large population, huge economic gaps exists between different regions,"one size fits"all regulation and control policy is obviously not in conformity with national conditions, "Differential Treatment", "Suit our measures to differing conditions in terms of locality" should be the strategic direction of macroeconomic policy.