Research On Convergence Of Regional Housing Prices In China

Real estate has become the mainstay industry in China since the reform of housing market. Particularly, people in China put more and more attention on housing problem because of the exorbitance of speculation degree in real estate market which can be treated as the critical cause of retain gilt-edged home values. During the process of housing prices rising, different patterns has turned out in different regions, which presents a research subject that whether there exists convergence among regional housing prices and what the mechanism of convergence is. Further, the issue may be also an interesting subject that whether the mechanism of convergence concerns the fundamentals determinism.This paper conducts research based on the study of housing price fluctuation and the theory of fundamentals determining housing prices. Simply, with the study of housing price fluctuation as the starting point of this paper, the model ofβ-convergence has been employed to test the existence of convergence among regional housing prices, which is directed at solving the problem of "What is it" while the theory of fundamentals determining housing prices has been considered as the basic analysis of the mechanism of convergence among regional housing prices which concerns the problem of "Why is it".The paper designs two empirical studies using the data of provincial level ranging from 1994 to 2010, which includes the variable of housing prices and economic fundamentals. This first study tests the existence of convergence by employing theβ-convergence model combined with spatial effect, a research method employed in economic growth study, while the latter, applying panel data analysis, tries to make clear the mechanism of convergence by arguing that the house price is composed of the basic house price and capital gain. The first research comes with the conclusion that the convergence existed among regional housing prices in the early years which has been destroyed by the divergence of housing prices in Eastern China recently. The latter concludes that although the fundamentals can determine the housing prices at national level all the time, it has turned into vain in Eastern China after 2002 or 2003. In summary, via theoretical analysis and empirical studies, the paper believes that whether the mechanism of convergence can work well depends on whether economic fundamentals can determine housing prices.