A Spatial Econometric Research On Convergence Of Regional Housing Prices In China

Since the comprehensive reform of housing system in1998, the level of marketization ofChina’s real estate market is continuously improved, investment enters a fast-developing period.Especially in recent years, local prices rose significantly, extremely high prices has becomethe focus of attention. Although the state has published various policies to keep housingprices from rising too fast, we can’t understand China’s real estate development trend deeplyif not recognize the evolution of regional differences in housing price because the real estatemarket is a typical regional markets.Based on the interaction theory between housing price and economy, economicconvergence theory is applied to real estate market in this paper. The evolving direction ofthe gap in house price among regions are studied at first. Then try to explore the internalmechanism of convergence.Tobler ’s first law of geography (TFL) states that connections exist among everything.Traditional statistical theory assumes observations are independent, but this kind ofcircumstance is not widespread in real life, spatial observations often lack mutualindependence leading to the drawbacks of traditional measurement methods. Thus, whetherTFL applies to the real estate market? Whether housing prices is under the influence of thesurrounding areas’ prices? Starting with the spatial correlation, this paper uses spatialregression models to check the convergence in housing price. Meanwhile, the above assumesthat there was no difference in convergence direction and degree among various regions. Itcan not specify a unique convergence characteristics of a region. Weather different regionshave the same convergence characteristics? Heterogeneity as a starting point, we usegeographically weighted regression model to study the differences of convergence. Finally,panel data methods are applied to study the convergence path. we use geographicallyweighted regression model to study the differences of convergence.This paper collects average prices and economic data of China’s337cities from2000to2013. Exploratory data analysis proved the presence of spatial correlation. Empirical resultsof convergence proved the presence of β convergence at national level. Considering theheterogeneity, we found no convergence exist in60eastern cities. Long-term equilibrium pathanalysis showed that real estate prices are still within the control of economic fundamentals.but in the short term, the convergence of economic development will not have an impact onthe convergence of real estate supply.