A Study On The Contagion Effect Of Global Real Estate Prices

The United States sub-prime mortgage crisis broke out in2007，driven real estateprices in most countries went down；Since2011, the real estate prices throughout theworld moving upward swiftly, represented by Dubai, Hong Kong, the US and so on.The contact with each other among the global real estate prices is so close that thestudy on contagion effect of the global real estate prices is very important from a macroperspective. For investors who make decisions of the real estate investment portfolioworldwide, for policy makers and regulators to improve early warning mechanisms,regulation of the market, are of great sense.In recent years, from the perspective of global real estate prices fluctuation,generally there have2characteristics. In one side, in terms of space, there are somesimilar real estate price volatility characteristics among the countries, whose economicand geographic distances are close. In the other side, there have advance or lagrelevance on the surface of the world real estate price fluctuations in the aspect of time.Based on these two fluctuation characteristics of the global real estate price, thispaper analyzes the quarterly data of real estate prices in26countries worldwide over2000Q1-2012Q4. First of all, those26countries will be differentiated into five regions,in the light of their price fluctuation characteristics and inherent affecting factors.Secondly, the common factors within regions worldwide are extracted using dynamicfactor model, and then drawing analysis and variance decomposition analysis areemployed. Finally, from two dimensions of the space and time, the regional commonfactors all over the world are co-integration tested and causality tested, to research theexistence of contagion effect, even its contagion paths, of the global real estate prices indifferent areas at different times.Specific innovations of this paper are as follows:First, the existence of global real estate prices contagion effect is revealed by avariety of measurement methods.Integrated use of cluster analysis, correlation coefficient analysis, dynamic factormodel, variance decomposition, co-integration test, causality test methods to analyze thedynamic relationships among global real estate price fluctuations, and then revealing theexistence of global real estate prices contagion. Second, different contagion paths of global real estate prices are deduced, fromthe space and time dimensions.In aspect of space, major countries worldwide are divided into5regions, whichhave different characteristics of real estate price volatility. In terms of the time, the threeperiods of global real estate price developments are summarized: the boom period(2000-2007year), the crisis period (2008-2010year), the recovery period (2011-2012year) through literature analysis. Integrate of these2dimensions, different contagionpaths of global real estate prices are deduced.