Study On The Impact Factors Of Regional Housing Prices

Real estate prices have soared and aren’t likely to get cheaper anytime soon withseveral years of real estate regulation. Traditional supply and demand theory seem notto explain the abnormal development of the Chinese real estate market. Experiencehas shown that some of the fiscal and monetary policies promote the development ofReal estate unintentionally.This study use panel data from31provinces over the period1999to2012toanalyses empirically the role of provincial governments’ behavior and exchangefluctuation in determining housing price levels in China. Our empirical results suggestthat the level of fiscal autonomy and exchange rate has contributed significantly toregional housing price after controlling for social and economic factors. In particular,we found that the longer the distance between Beijing and a local government, thestronger the impact of the local governments’ level of fiscal autonomy on the averagehousing price in its jurisdiction, and the impact of RMB exchange rate after2005onreal housing price is stronger for provinces with more developed services sector.This study contributes to the body of knowledge on regional housing price.Unlike previous studies that only focused mainly on the impact of economic andsocial Factor. This study also aimed at studying the role of tax system and exchangerate reform in China. The results have important policy and practical implications.First of all, provincial governments blindly and vigorously promote the real estateindustry through Fiscal stimulus to improve the economy and fiscal revenue, theymay also lead to conflicting goals between central governments’ macro-control policy.In addition such fiscal stimulus and local debt may unexpectedly lead to housing pricebubbles that are economically and socially undesirable. The next one, the centralgovernments’policy to reform the exchange rate formation mechanism of the RMB in2005has also contributed to housing price escalation, and the impact was not uniformbut stronger in provinces with a more developed tertiary sector, which are usuallywealthier provinces. Increase in housing prices in these provinces may lead to fasterregional economic growth and thus contributing to even more sever regional incomedisparity, which contradicts the central governments’ goal of reducing incomepolarization. Finally because of the different levels of financial autonomy, differentimpacts of RMB exchange rate fluctuations, the central government should take intoaccount the specific conditions of local government while forming the real estate macro-control policy.